Gideon Corp. is a reinsurance and financial services company. Gideon strongly believes in evaluating the performance of its stand-alone divisions using financial metrics such as ROI and residual income. For the year ended December 31, 2019, Gideon's CFO received the following information about the performance of the property/casualty division: Sales Revenues Operating Income Total Assets $ 900 000 225 000 1 500 000 Current Liabilities 300 000 Debt (Interest rate: 5%) 400 000 Common Equity (book value) 500 000 For the purposes of divisional performance evaluation, Gideon defines investment as total assets, and income as operating income (that is, income before interest and taxes). The firm pays a flat rate of 25% in taxes on its income.

Gideon Corp. is a reinsurance and financial services company. Gideon strongly believes in evaluating the performance of its stand-alone divisions using financial metrics such as ROI and residual income. For the year ended December 31, 2019, Gideon's CFO received the following information about the performance of the property/casualty division: Sales Revenues Operating Income Total Assets $ 900 000 225 000 1 500 000 Current Liabilities 300 000 Debt (Interest rate: 5%) 400 000 Common Equity (book value) 500 000 For the purposes of divisional performance evaluation, Gideon defines investment as total assets, and income as operating income (that is, income before interest and taxes). The firm pays a flat rate of 25% in taxes on its income.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 90PSB

See similar textbooks

Similar questions

Hamilton Corp. is a reinsurance and financial services company. Hamilton strongly believes in evaluating the performance of its stand-alone divisions using financial metrics such as ROI and residual income. For the year ended December 31, 2017, Hamilton’s CFO received the following information about the performance of the property/casualty division:Sales revenues $ 900,000Operating income 225,000Total assets 1,500,000Current liabilities 300,000Debt (interest rate: 5%) 400,000Common equity (book value) 500,000For the purposes of divisional performance evaluation, Hamilton defines investment as total assets and income as operating income (that is, income before interest and taxes). The firm pays a flat rate of 25% in taxes on its income. Q. Hamilton’s CFO has heard about EVA and is curious about whether it might be a better measure to use for evaluating division managers. Hamilton’s four divisions have similar risk characteristics. Hamilton’s debt trades at book value while its equity…
Hamilton Corp. is a reinsurance and financial services company. Hamilton strongly believes in evaluating the performance of its stand-alone divisions using financial metrics such as ROI and residual income. For the year ended December 31, 2017, Hamilton’s CFO received the following information about the performance of the property/casualty division: Sales revenues $ 900,000 Operating income 225,000 Total assets 1,500,000 Current liabilities 300,000 Debt (interest rate: 5%) 400,000 Common equity (book value) 500,000 For the purposes of divisional performance evaluation, Hamilton defines investment as total assets and income as operating income (that is, income before interest and taxes). The firm pays a flat rate of 25% in taxes on its income. Q. Hamilton’s CFO has heard about EVA and is curious about whether it might be a better measure to use for evaluating division managers. Hamilton’s four divisions have similar risk characteristics. Hamilton’s debt trades at book value while its…
Hamilton Corp. is a reinsurance and financial services company. Hamilton strongly believes in evaluating the performance of its stand-alone divisions using financial metrics such as ROI and residual income. For the year ended December 31, 2017, Hamilton’s CFO received the following information about the performance of the property/casualty division: Sales revenues $ 900,000 Operating income 225,000 Total assets 1,500,000 Current liabilities 300,000 Debt (interest rate: 5%) 400,000 Common equity (book value) 500,000 For the purposes of divisional performance evaluation, Hamilton defines investment as total assets and income as operating income (that is, income before interest and taxes). The firm pays a flat rate of 25% in taxes on its income. Q. What was the net income after taxes of the property/casualty division?
Hamilton Corp. is a reinsurance and financial services company. Hamilton strongly believes in evaluating the performance of its stand-alone divisions using financial metrics such as ROI and residual income. For the year ended December 31, 2017, Hamilton’s CFO received the following information about the performance of the property/casualty division: Sales revenues $ 900,000 Operating income 225,000 Total assets 1,500,000 Current liabilities 300,000 Debt (interest rate: 5%) 400,000 Common equity (book value) 500,000 For the purposes of divisional performance evaluation, Hamilton defines investment as total assets and income as operating income (that is, income before interest and taxes). The firm pays a flat rate of 25% in taxes on its income. Q. Based on Hamilton’s required rate of return of 8%, what was the property/casualty division’s residual income for 2017?
Hamilton Corp. is a reinsurance and financial services company. Hamilton strongly believes in evaluating the performance of its stand-alone divisions using financial metrics such as ROI and residual income. For the year ended December 31, 2017, Hamilton’s CFO received the following information about the performance of the property/casualty division: Sales revenues $ 900,000 Operating income 225,000 Total assets 1,500,000 Current liabilities 300,000 Debt (interest rate: 5%) 400,000 Common equity (book value) 500,000 For the purposes of divisional performance evaluation, Hamilton defines investment as total assets and income as operating income (that is, income before interest and taxes). The firm pays a flat rate of 25% in taxes on its income. Q. What was the division’s ROI for the year?
Halliburton and Schlumberger compete in the oil field services sector. Refer to the following 2018 financial data for the two companies to answer the requirements. $ millions HAL SLB Total revenue $21,596 $29,534 Pretax net nonoperating expense 588 383 Net income 1,740 2,286 Average operating assets 24,529 71,228 Average operating liabilities 5,299 14,849 Marginal tax rate 22% 19% Return on equity 18.56% 5.86% a. Compute return on net operating assets (RNOA) for each company.b. Disaggregate RNOA into net operating profit margin (NOPM) and net operating asset turnover (NOAT) for each company.Do not round until your final answer. Round answers to two decimal places (percentage example: 0.12345 = 12.35%). HAL SLB RNOA Answer Answer NOPM Answer Answer NOAT Answer Answer
Word Corporation, a publicly owned corporation, is subject to the requirements for segment reporting. In its statement of comprehensive income for the year ending July 31, 2021, Word reported revenues of$50M, operating expenses of $47M and net income of $3M. Operating expenses included payroll costs of $15M. Word’s combined assets of all segments at July 31, 2020 were $40M. In its 2021 financial statements, Word should disclose major customer data if sales to any singlecustomer amount to at least _____________________.A. $ 300,000B. $1,500,000C. $4,000,000D. $5,000,000
Alucard Company has 2 divisions, Aye and Bee. Both qualify as business components. In 2018, the firm decided to dispose of the assets and liabilities of division Bee and it is probable that the disposal will be completed early 2019. The revenue and expenses of Alucard Company for 2018 and 2017 are as follows: 2018 2017 Sales-Aye 5,000,000 4,600,000 Total nontax expenses-Aye 4,400,000 4,100,000 Sales-Bee 3,500,000 5,100,000 Total nontax expenses-Bee 3,900,000 4,500,000 During the later part of 2018, Alucard disposed of a portion of division Bee and recognized a pretax loss of 2,000,000 on the disposal. The income tax rate is 30%. What amount of loss from discontinued operation should Alucard report in 2018?
The following are selected data for the division for the consumer products of ABC Corp for 2019: Sales 50,000,000 Average invested capital (assets) 20,000,000 Net income 2,000,000 Cost of capital 8% What is the asset turn-over ratio for the division? 0.25 2.5 8 10% Group of answer choices 1 2 3 4
The Carioco Company has two divisions that operate independently of one another. The financial data for the year 2022 reported the following results: Alpha Beta Sales $3,000,000 $2,500,000 Operating income 750,000 550,000 Taxable income 650,000 375,000 Investment 6,000,000 5,000,000 The company's desired rate of return is 10%. Income is defined as operating income. Required: What are the respective return-on-investment ratios for the Alpha and Beta Divisions? a. 0.110 and 0.125 b. 0.125 and 0.110 c. 0.050 and 0.150 d. 0.108 and 0.075
The Kelly Services, Inc., and subsidiaries partial statement s of earnings from its annual report are presented below. 2020 2019 Revenues from services 4314.8 5517.3 Cost of services 3613.1 4539.7 Gross Profit 701.7 977.6 Selling and administrative expense 794.7 967.4 Asset impairments 53.1 80.5 Net earnings (loss) (164.1) (70.3) Prepare a horizontal common size analysis, and comment on the trend.
Allied Construction and Axis Construction reported the following information in their annual financial statements ($ in millions): Allied Construction 2021 2020 Sales $ 50,000 $ 45,000 Net income 3,900 4,000 Total assets 26,000 24,000 Axis Construction 2021 2020 Sales $ 87,000 $ 72,000 Net income 3,400 4,100 Total assets 53,000 64,000 Required: 1. Calculate Allied Construction's return on assets, profit margin, and asset turnover ratio for 2021. (Do not round your intermediate calculations. Round your answers to 2 decimal places.) 1-return on assets: _____% 2- profit margin: ________% 3-asset turnover: _____times 2. Calculate Axis Construction's return on assets, profit margin, and asset turnover ratio for 2021. (Do not round your intermediate calculations. Round your answers to 2 decimal places.) 1-return on assets: _____% 2- profit margin: ________% 3-asset turnover: _____times 3-a. Which company…