Question

1 Requirements 1. Calculate trend percentages for each item for 2015 through 2018. Use 2014 2. Calculate the rate of return on net sales for 2016 through 2018, rounding to 3. Calculate asse trover for 2016 through 2018. Explain what this means as the base year and round to the nearest percent the nearest one-tenth percent. Explain what this means. Use a DuPont Analysis to calculate the rate of return on average total assets (ROA) for 2016 through 2018. How does Alexander Shipping's return on net sales for 2018 compare with previous years? How does it compare with that of the industry? In the shipping industry, rates above 9% are considered good, and rates above 11% are outstanding Evaluate the company's ROA for 2018, compared with previous years and against an 18% benchmark for the industry. 4. 5. 6. Print Done

Answer 1

1. Calculation of trend percentages:

Particulars	2018	2017	2016	2015	2014
Net Sales	475	325	360	314	297
Net Income	62	35	44	33	29
Total Assets	300	272	262	236	209
Trends:
Net Sales (taking base as 2014)	475/297*100 =160%	325/297*100 =109%	360*297/100 =121%	314/297*100 =106%	100%
Net Income	62/29*100 =214%	35/29*100 =121%	44/29*100 =152%	33/29*100 =114%	100%
Total Assets	300/209*100 =144%	272/209*100 =130%	262/209*100 =125%	236/209*100 =113%	100%

2.Calculation of return on Net sales:

Rate of return on net sales =(Net Income /Net Sales)*100

62/475*100 =13%

35/325*100 =11%

44/360*100 =12%

33/314*100 =11%

29/297*100 =10%

3. Calculation of asset turnover ratio:

Asset Turnover ratio (Sales/Total Assets)

475/300 =1.58

325/272 =1.19

360/262 =1.37

314/236 =1.33

297/209 =1.42

4. Using Du pont analysis, calculation of rate of return on average total assets:

Using DU PONT analysis to to calculate rate of return on average total assets =(Profit margin*Asset Turnover)

1.58*13% =21%

1.19*11% =13%

1.34*12% =16%

1.33*11% =15%

1.42*10% =14%

5.Compared to the earlier years, rate of return on net sales of 2018 has been highest since 2014 i.e 13%.

The company's return on net sales has been good as compared to the industry since the company has maintained a return on net sales of more than 9% throughout from 2014. Further, it has been outstanding since 2015 to 2018.

6 Company's return on net assets has increased considerably in 2018 i.e 21% as compared to the earlier years. While. as per industry benchmark it has outstanding performance in 2018 i.e 21% but not in the other years.