Question

(Common-size analysis and differences in profitability and leverage) Comparative financial statement data for Cool Brewery Ltd. and Northern Beer Ltd., two competitors, follow (amounts in thousands): Cool Brewery Ltd. 2020 2019 Northern Beer Ltd. 2020 2019 Net sales $219,110 $41,380 Cost of goods sold 98,340 15,530 Operating expenses 83,890 18,700 Interest expense 7.990 380 Income tax expense 4,840 1,130 Cash 4,640 8,200 $2,640 7,980 Other current assets Long-term assets (net) Current liabilities 12,800 $10,320 86,880 81,480 196,790 218,710 75,520 55,070 94,610 120,740 55,800 48,900 70,540 85,800 Long-term liabilities 26,290 3,510 7,700 18,300 9,620 29,880 4.340 7430 16,600 12,130 Share capital Retained earnings

Answer 1

Answer

Common Size Income Statement Net Sales Cost of goods sold operating expenses Interest expense Income tax expense Net Income Cool Brewery Ltd 219,110 100.0% 98,340 44.9% 83,890 38.3% 7,990 3.6% 4,840 2.2% 24,050 11.0% Northern Beer Ltd 41,380 15,530 18,700 380 1,130 5,640 100.0% 37.5% 45.2% 0.9% 2.7% 13.6% Cool Brewery Ltd Northern Beer Ltd Return on Assets =Net Income/Average Assets Net Income 24,050 5,640 2019 Cash other current assets long term assets Total Assets Average Assets 2020 12,800 86,880 196,790 296,470 303,490 2019 10,320 81,480 218,710 310,510 2020 4,640 8,200 26,290 39,130 39,815 2,640 7,980 29,880 40,500 Return on Assets 7.9% 14.2% Cool Brewery Ltd Northern Beer Ltd Return on shareholders equity =Net Income/Average Equity Net Income 24,050 5,640 Share Capital Retained Earnings Total Equity Average Equity 2020 55800 70540 126340 130,520 2019 48900 85800 134700 2020 18300 9620 27920 28,325 2019 16600 12130 28730 Return on shareholders equity 18.4% 19.9% Northern Beer Ltd Deb to equity ratio Cool Brewery Ltd =(Current Liabilities +Long term liabilities)/ Equity Current Liabilities 75520 Long-term Liabilities 94610 Equity 126340 Deb to equity ratio 1.35 3510 7700 27920 0.40 Debt as the percentage of total capitalisation =(Current Liabilities +Long term liabilities)/ long term assets Current Liabilities 75520 Long-term Liabilities 94610 Long term assets 196,790 Debt as the percentage of total capitalisation 0.86 3510 7700 26,290 0.43