The income statement and the balance sheet for the Hamblin Company for the year ended December 31, 2003, are provided below.
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Sales revenue |
$270,000 |
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Expenses: |
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Cost of goods sold |
$150,000 |
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Salaries expense. |
45,000 |
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Interest expense |
10,500 |
205,500 |
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Net income . |
$64,500 |
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Hamblin Company Balance Sheet |
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31 Dec 03 |
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Assets |
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Cash |
$49,500 |
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Accounts receivable |
22,500 |
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Inventory |
15,000 |
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Land |
225,000 |
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Total assets. . |
$312,000 |
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Liabilities and Owners Equity |
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Liabilities: |
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Accounts payable |
$15,000 |
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Owners equity: |
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Capital stock . |
$202,500 |
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Retained earnings . |
94,500 |
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Total owners equity . |
297,000 |
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Total liabilities and owners equity |
$312,000 |
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Requied
1. Using the DuPont framework, compute Hamblin s return on equity (ROE).
2. Prepare a common size balance sheet, using total revenue as the basis for comparison.
3. Interpretive Question: Based on your analysis in (1) and (2), does Hamblin Company appear to be in good shape?