Question

Given below is summary information from DuPont's income statement for the last three years (in millions). 2016 2015 2014 Sales 24594 25130 28406 Income from Continuing Operations 2521 1895 3145 Gains from disposal of Discontinued Business -5 86 476 Net Income 2525 1959 3636 Translation Adjustment -510 -1605 -876 Minimum Pension Liability Adjustment 323 574 -2199 Unrealized Gains on Marketable Securities 0 1 -2 Comprehensive Income 2010 651 371 a. Calculate return on sales using (1) income from continuing operations (ICO / Sales); (2) net income (NI / Sales); and (3) comprehensive income (CI / Sales). 2016 2015 2014 ICO / Sales NI / Sales CI / Sales

Answer 1

Solution and Explanation:

2016 2015 2014

ICO/Sales

ICO 2521 1895 3145

Sales 24594 25130 28406

ICO/Sales 10.25% 7.54% 11.07%

NI/Sales

NI 2525 1959 3636

Sales 24594 25130 28406

NI/Sales 10.27% 7.80% 12.80%

CI/Sales

CI 2010 651 371

Sales 24594 25130 28406

CI/Sales 8.17% 2.59% 1.31%

b. If the gain realized from selling the segment is reported as a separate line item, it has no impact on Incomes. It is shown separately for clear understanding to the intended users. However, the figures of Comprehensive income, Net income and Income from continuing operations will not be affected (except for the difference in amounts).

If the gain is 3866 in 2016, ICO/Sales would remain same at 10.25%.

NI/Sales would vary because of increase in the gain.