Profitability Analysis Exercises and Problems
Do the assigned questions using Malimash, Inc.’s 2014 financial data below:
Malimash, Inc.
2014 Financial Data ($ millions)
Income Statement Data
Sales Revenue $7,120.00
Depreciation $230.00
Interest Expense $10.00
Pretax Income $2,550.00
Income Taxes $900.00
Net Income $1,650.00
Balance Sheet Data
Current Assets $4,850.00
Fixed Assets, Net $2,400.00
Total Assets $7,250.00
Current Liabilities $3,290.00
Long-Term Debt $100.00
Shareholders’ Equity $3,860.00
Total Liabilities and Shareholders’ Equity $7,250.00
Required:
Calculate return on common equity for 2014 using year-end amounts and assuming no preferred dividends.
Disaggregate the ROCE into operating (RNOA) and non-operating components.
Comment on Merck’s use of leverage. (Assume all assets and current liabilities are operating at a 35% tax rate).
Your submission must:
Be 1-2 pages for the written portion, APA format
Include at least 2 scholarly citations in addition to textbook
Incorporate key learning concept from textbook (PDF version of textbook uploaded)
Include the Excel spreadsheet with computations.
Clearly separate your responses so your instructor knows the problems you are answering.
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