Question

You have just been hired as a loan officer at San Diego State Bank. Your supervisor has given you a file containing a request from Mobile Company, a manufacturer of auto components, for a $1,000,000 five-year loan. Financial statement data on the company for the last two years are given below: Mobile Company Comparative Balance Sheet This Year Last Year $ 308,100 $ Assets Current assets Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses . 918,000 1,340,500 91,300 392,150 106,000 621,000 740,500 76,300 Total current assets Plant and equipment, net 2,657,900 3.442 800 1.935.950 3,098,400 Total assets $ 6,100,700 $ 5,034,350 Liabilities and Stockholders' Equity Liabilities: Current liabilities Bonds payable $ $ 1.261,200 1.294,000 2,555,200 755,600 1,094,000 Total liabilities 1.849,600 600.000 2.000.000 600.000 2,000,000 584,750 945.50 Stockholders' equity Preferred stock, 8%, $30 par value Common stock, $40 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 3,545,500 $ 6,100.700 3,184.750 S5034,350

Answer 1

Return on Assets =EBIT / Avg Total Assets

Total asset(start of last year) = 4374000

Total asset (end of last year) = 5034350

ATA(last year) = (4374000 + 5034350)/2 = 4704175

EBIT(last year) = 564,000

RoA(last year) = 564000/4704175 = 0.1199 = 11.99%

Total asset(start of this year) = 5034350

Total asset (end of this year) = 6100700

ATA(this year) = (5034350 + 6100700)/2 = 5567525

EBIT(this year) = 814,000

RoA(this year) = 814000/5567525 = 0.1462 = 14.62%

3.RoCSE = NetIncome - preferred dividend / average stock holder equity

RoCSE(last year):

NetIncome (last year) = 316750

preferred dividend = 48000

stock holder equity (start of last year) = 4519185

st holder equity(end of last year) = 3184750

avg st holder equity = (4519185 + 3184750)/2 = 3851967.5

RoCSE(last year) = (316750 - 48000)/ (3851967.5) = 0.06976 = 6.976%

RoCSE(this year):

NetIncome (this year) = 477750

preferred dividend = 48000

stock holder equity (start of this year) = 3184750

st holder equity(end of this year) = 3545500

avg st holder equity = (3545500 + 3184750)/2 = 3365125

RoCSE(this year) = (477750 - 48000)/ (3365125) = 0.1277 = 12.77%