Here are simplified financial statements for Phone Corporation in a recent year: INCOME STATEMENT (Figures in $ millions) Net sales $ 14,000 Cost of goods sold 4,510 Other expenses 4,212 Depreciation 2,788 Earnings before interest and taxes (EBIT) $ 2,490 Interest expense 730 Income before tax $ 1,760 Taxes (at 30%) 528 Net income $ 1,232 Dividends $ 946 BALANCE SHEET (Figures in $ millions) End of Year Start of Year Assets Cash and marketable securities $ 98 $ 167 Receivables 2,832 2,670 Inventories 232 283 Other current assets 912 977 Total current assets $ 4,074 $ 4,097 Net property, plant, and equipment 20,063 20,005 Other long-term assets 4,306 3,860 Total assets $ 28,443 $ 27,962 Liabilities and shareholders’ equity Payables $ 2,654 $ 3,130 Short-term debt 1,464 1,618 Other current liabilities 856 832 Total current liabilities $ 4,974 $ 5,580 Long-term debt and leases 4,777 5,222 Other long-term liabilities 6,268 6,239 Shareholders’ equity 12,424 10,921 Total liabilities and shareholders’ equity $ 28,443 $ 27,962 Calculate the following financial ratios for Phone Corporation: (Use 365 days in a year. Do not round intermediate calculations. Round your final answers to 2 decimal places.) 1) return on equity (use average balance sheet) 2) return on assetes (use average balance sheet) 3) return on capital

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 4PB

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Here are simplified financial statements for Phone Corporation in a recent year:

INCOME STATEMENT
(Figures in $ millions)
Net sales	$	14,000
Cost of goods sold		4,510
Other expenses		4,212
Depreciation		2,788
Earnings before interest and taxes (EBIT)	$	2,490
Interest expense		730
Income before tax	$	1,760
Taxes (at 30%)		528
Net income	$	1,232
Dividends	$	946

BALANCE SHEET
(Figures in $ millions)
	End of Year		Start of Year
Assets
Cash and marketable securities	$	98		$	167
Receivables		2,832			2,670
Inventories		232			283
Other current assets		912			977
Total current assets	$	4,074		$	4,097
Net property, plant, and equipment		20,063			20,005
Other long-term assets		4,306			3,860
Total assets	$	28,443		$	27,962
Liabilities and shareholders’ equity
Payables	$	2,654		$	3,130
Short-term debt		1,464			1,618
Other current liabilities		856			832
Total current liabilities	$	4,974		$	5,580
Long-term debt and leases		4,777			5,222
Other long-term liabilities		6,268			6,239
Shareholders’ equity		12,424			10,921
Total liabilities and shareholders’ equity	$	28,443		$	27,962

Calculate the following financial ratios for Phone Corporation: (Use 365 days in a year. Do not round intermediate calculations. Round your final answers to 2 decimal places.)

1) return on equity (use average balance sheet)

2) return on assetes (use average balance sheet)

3) return on capital

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