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Assignment #1 Course: Engineering Economics

Lecturer: Ali I. Mire Marks: 10%


Submission: Class A must submit it by 12th April 2017 and Class B must submit it by 10th April 2017.
No delay will be accepted without a concrete justification.
Note: Please, don’t copy and past from eachother and don’t submit
what you don't understand. There will be different quizzes on the exact days of submission deadlines for both classes
which will precisely come from this assignment. If you answer all the assignment questions right,
it will be an advantage for you to get a good mark in the quiz.

Financial Statements of Dhisme Construction Company


Balance Sheet
Dhisme Construction Company
31 Jan, 2017 31 Jan, 2016
Assets
Cash $ 113,500 $ 110,250
Account Receivable $ 33,000 $ 25,300
Inventories $ 21,000 $ 17,500
Total Current Assets $ 167,500 $ 153,050
Buildings $ 43,000 $ 43,000
Machinery and Equipment $ 19,500 $ 10,216
Land $ 31,300 $ 31,300
Total Fixed Assets $ 93,800 $ 84,516
Total Assets $ 261,300 $ 237,566

Liabilities
Notes Payable within one Year $ 43,500 $ 40,250
Account Payable within one year $ 11,250 $ 43,530
Total Current Liabilities $ 54,750 $ 83,780
Longterm Notes Payable $ 23,500 $ 25,600
Total Longterm Liabilities $ 23,500 $ 25,600
Total Liability $ 78,250 $ 109,380

Equity
Owners's Equity $ 137,693 $ 128,186
Retained Earnings $ 45,357 None
Total Owners Equity $ 183,050 $ 128,186
Total Liability and Owners Equity $ 261,300 $ 237,566

Income Statement
Dhisme Construction Company
31 Jan, 2017 31 Jan, 2016
Total contract revenues Earned $ 253,600 $ 185,200
Cost of Contracts $ 157,470 $ 123,259
Gross Margin $ 96,130 $ 61,941
Salaries and Administrative $ 12,500 $ 10,257
Rent and Transportation $ 8,250 $ 6,240
Annual Interest Payment $ 2,100 $ 2,100
Others $ 15,254 $ 13,700
Total Operating Cost $ 38,104 $ 32,297
Operating Income $ 58,026 $ 29,644
Income Tax Provision $ 14,250 $ 7,263
Net Income $ 43,776 $ 22,381

Statement of Retained Earnings


Dhisme Construction Company
31 Jan, 2017 31 Jan, 2016
Beginning retained Earnings $ 14,981 None
Net income $ 43,776 $ 22,381
Total Earnings of the year $ 58,757 $ 22,381
Dividends $ 13,400 $ 7,400
Retained Earnings $ 45,357 $ 14,981

Part One: Answer the following questions (5%)


1) What are the three types of business organisations and explain their core differences?
2) Explain the primary role of engineers in business and non-business organisations?
3) What are most important engineering economic decisions?
4) Explain the engineering economic principle that states marginal revenue/benefit
must exceed marginal cost?
5) Why most of the local construction companies don’t prepare financial statements?
6) What is the difference between these terms
a. Profit Margin, Operating Profit and Net Profit
b. Notes payable and accounts payable
c. Inventory and Equipment
7) Explain why Assets are equal to liabilities plus equity?
8) what do these statemnents tell about the business in the fiscal year?
a. Balance Sheet
b. Income statement
c. Statement of retained earnings
d. Statement of Cashflow
9) what is the difference between owner's equity and Stockholder's equity?
10) why investors, creditors and managers use financial ratios in businesses and who uses which?

Part Two: Using the above financial statement, answer the following conceptual numerical questions (5%)
1) How much percentage of liability Dhisme construction company invested in its assets in 2017?
2) How many times can Dhimse Construction company pay its annual interest payment in 2017?
3) how many times can Dhisme construction company cover its current liabilities in 2017?
4)How many times can Dhisme construction company cover its short-term liability without liquidating its inventory in 2017?
5) how many days it takes Dhisme construction company to collect its account receivables in 2017?
6) how well did Dhisme contruction utilized its assets for the revenue it earned in 2017?
7) how much profit did Dhisme construction get per Dollar of revenue earned in 2017?
8) how well did Dhisme Construction conpany utilized its assets for the profit it earned in 2017?
9) how much profit did the money invested in the company by its owners generate per dollar of profit earned by the company in 2017?
10) How much percentage did the owners of Dhisme Construction Company invested in the assets of the company in 2017?