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:
1. Calculate return on common equity for 2014 using year-end amounts and assuming no preferred dividends.
2. Disaggregate the ROCE into operating (RNOA) and non-operating components.
3. 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.
