# 1. compute the profitability ratios, including the a and b components

1. Compute the profitability ratios, including the a and b components (DuPont Methods) of ratios 2 and 3 as shown in the textbook. The profitability ratios should be shown for all three years. 2. Write a brief one-paragraph description of any trends that appear to have taken place over the three-year time period. 3. In examining the income statement in Figure 1, note that there was an extraordinary loss of \$170,000 in 2006. This might have represented uninsured losses from a fire, a lawsuit settlement, etc. It probably does not represent a recurring event or affect the earnings capability of the firm. For that reason, the astute financial analyst might add back in the extraordinary loss to gauge the true operating earnings of the firm. Since it was a tax-deductible item, we must first multiply by (1-tax rate) before adding it back in.* The tax rate was 35 percent for the year.* \$170,000 Extraordinary loss .65 (1-tax rate) \$110,500 Aftertax addition to profits from eliminating the extraordinary loss from net income The more representative net income number for 2003 would now be: Initially reported (Figure 1) \$200,318Adjustment for extraordinary loss being eliminated +110,500Adjusted net income \$310,818
Based on the adjusted net income figure of \$310,818, re compute the profitability ratios for 2006 (include part a and b for ratios 2 and 3).
4. Now with the adjusted net income numbers as part of the ratios for 2006, write a brief one-paragraph description of trends that appear to have taken place over the three-year time period (refer back to the data in Question 1 for 2004 and 2005).
5. Once again, using the revised profitability ratios for 2006 that you developed in Question 3, write a complete one paragraph analysis of the company’s profitability ratios compared to the industry ratios (figure 3). Make sure to include asset turnover and debt to total assets as supplemental material in your analysis. 6. Harrod’s has a superior sales to total assets ratio compared to the industry. For 2006, compute ratios 4, 6 and 7 as described in the text and compare them to industry data to see why this is so. Write a brief one-paragraph description of the results. Note: for ratio 4, only half the sales are on credit terms. 7. Conclusion: Based on your analysis in answering Questions 4 and 5, do you hink that Becky Harrod has a legitimate complaint about being charged 2½ percent over prime instead of one percent over prime? There is no absolute right answer to this question, but use your best judgment

## Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
\$26
The price is based on these factors:
Number of pages
Urgency
Basic features
• Free title page and bibliography
• Unlimited revisions
• Plagiarism-free guarantee
• Money-back guarantee
On-demand options
• Writer’s samples
• Part-by-part delivery
• Overnight delivery
• Copies of used sources
Paper format
• 275 words per page
• 12 pt Arial/Times New Roman
• Double line spacing
• Any citation style (APA, MLA, Chicago/Turabian, Harvard)

# Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

### Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

### Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

### Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.