Question

QUESTION 17 • The Cypress Corporation's Annual Report contained the following information: Balance Sheet as of December 31, 20XX Cash $72.000 439,000 594.000 $1,405,000 Accounts Payable Other Short-term Payables Total Current Liabilities Long-term Debt Total Liabilities Total Common Equity Total Liabilities & Equity $32,000 70.000 $102,000 900.000 $1,002.000 834.000 S1336.000 Accounts Receivable Inventories Total Current Assets Plant, property, equip Total Assets 731.000 $1.836 000 Income Statement for the year ending December 31, 20XX Sales Cost of Goods Sold Gross Operating Profit General Adm & Selling Exp Depreciation Misc Expenses $4,290,000 3.580 000 $ 710,000 236,320 159,000 94.000 $ 220,680 40.000 $ 180,680 72.272 S 108.408 Eamings Before Interest and Taxes Interest Expense Earnings Before Taxes Taxes (40%) Net Income Calculate the following (and show your work!) financial ratios for Cypress, compare them with the industry average data provided and comment if each ratio signifies a strength, weakness or neither for Cypress. (24 points) Strength, Weakness, or Neither (1 point each) Ratio Calculation Industry Average (2 points each) Return on Assets 8.00%

Answer 1

Return on assets = Net profit/ Assets = 108,408/1,836,000 = 5.9%

This ROA is much lesser than Industry average ie 8%. ROA signifies the return the capital providers earn for every dollar of asset invested. So it is a weakness for Cypress.