a.
Introduction: The return on assets is a financial ratio which states that how profitably a company has employed its assets. In other words, how the company has utilized its assets to generate income.
Requirement 1
The return on assets for companies C and P.
b.
Introduction: Comparison between similar companies in the same industry is crucial to the assessment of the company’s performance. A company’s financial data in absolute form can be useful measures if the same data is used to compare its rival company or competitors.
Requirement 2
Which of the two companies C and P is more successful in terms of the total amount of sales to customers?
c.
Introduction: Comparison between similar companies in the same industry is crucial to the assessment of the company’s performance. A company’s financial ratios, when compared with the industry data, can reveal lots of valuable information which the financial statements can not reveal.
Requirement 3
Which company has been more successful in terms of generating a net income from its total asset investment?
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FINANCIAL AND MANAGERIAL ACCOUNTING
- The income statement comparison for Rush Delivery Company shows the income statement for the current and prior year. A. Determine the operating income (loss) (dollars) for each year. B. Determine the operating income (percentage) for each year. C. The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the total assets amounts as the investment base, calculate the ROI. Was the decision to invest additional assets in the company successful? Explain. D. Assuming an 8% cost of capital, calculate the RI for each year. Explain how this compares to your findings in part C.arrow_forwardCoca-Cola and PepsiCo both produce and market beverages that are direct competitors. Key financialfigures for these businesses for a recent year follow.Key Figures ($ millions) Coca-Cola PepsiCoSales . $46,542 $66,504Net income . 8,634 6,462Average assets . . . . . . . . . . . . . . . . . . . . 76,448 70,518Required Which company is more successful in its total amount of sales to consumers?arrow_forwardAT&T and Verizon produce and market telecommunications products and are competitors. Key financial figures for these businesses for a recent year follow. Key Figures ($ millions) AT&T Verizon Sales . $126,723 $110,875 Net income . 4,184 10,198 Average assets . . . . . . . . . . . . . . . . . . . . 269,868 225,233 Required 1. Compute return on assets for (a) AT&T and (b) Verizon. 2. Which company is more successful in the total amount of sales to consumers? 3. Which company is more successful in returning net income from its assets invested?arrow_forward
- Cola Company and Pop Company both produce and market beverages that are direct competitors. Key financial figures for these businesses for a recent year follow: Key Figures ($ millions) Cola Company Pop Company Sales $ 45,660 $ 65,072 Net income 9,300 7,107 Average assets 75,000 69,000 Required: 1. Compute return on assets for Cola Company and Pop Company. (Enter values in $ millions.)arrow_forwardAT&T and Verizon produce and market telecommunications products and are competitors. Key financial figures for these businesses for a recent year follow. Which company is more successful in returning net income from its assets invested?arrow_forwardFollowing are data for BioBeans and GreenKale, which sell organic produce and are of similar size. Average total assets Net sales Net income BioBeans $227,500 115,000 11,375 Greenkale $174,000 69,600 2,800 Required: 1a. Compute the profit margin for both companies. 1b. Compute the return on total assets for both companies. 2. Based on analysis of these two measures, which company is the preferred investment?arrow_forward
- AT&T and Verizon produce and market telecommunications products and are competitors. Key financial figures for these businesses for a recent year follow.Compute return on assets for (a) AT&T and (b) Verizon.arrow_forwardAnalytical case—comparative analysis of profitability and financialleverage measures The annual reports of the Coca-Cola Co. and PepsiCo, Inc. ,indicate the following for the year ended December 31, 2011 (amounts in millions):Coca-Cola Co. PepsiCo, Inc.Net revenues.................................................................................. $46,452 $66,504Net income..................................................................................... 8,634 6,462Total assets, January 1, 2011......................................................... 72,921 68,153Total liabilities, January 1, 2011 ....................................................... 41,607 46,667Total liabilities, December 31, 2011 ................................................. 48,053 51,983Total stockholders’ equity, December 31, 2011.............................. 31,921 20,899Required:a. Calculate ROI and ROE for each company for 2011. (Hint: You will need to calculate some of the numbers used in the…arrow_forwardCoca-Cola and PepsiCo both produce and market beverages that are direct competitors. Key financial figures for these businesses for a recent year follow. Which company is more successful in its total amount of sales to consumers?arrow_forward
- Given the income statement below, Mega Trade Inc. wants to find the resulting net income for the year 2016 (in million). What is the right amount? Income Statement ($ Million) YEAR END YEAR END YEAR END YEAR END 2015 2016 2017 2018 Sales 1,234.90 1,251.70 1,300.40 1,334.40 Cost Sales -679.1 -659 -681.3 -667 Gross Operating Income Selling & Administration -339.7 -348.6 -351.2 -373.3 Depreciation -47.5 -52 -55.9 -75.2 Other Income/Expenses 11.8 7.6 7 8.2 Earnings Before Interest and Taxes Interest Income 1.3 1.4 1.7 2 Interest Expense -16.2 -15.1 -20.5 -23.7 Pre Tax Income Income Taxes -56.8 -64.2 -67.5 -72.6 Net Income Dividends -38.3 -38.7 -39.8 -40.1arrow_forwardHow do you forecast retained earnings? Please show steps and formula. Following are the income statements and balance sheets of Best Buy Co., Inc. Income Statement, Fiscal Years Ended Feb. 26, 2011 Feb. 27, 2010 Revenue $ 50,272 $ 49,694 Cost of goods sold 37,611 37,534 Restructuring charges - cost of goods sold 24 -- Gross profit 12,637 12,160 Selling, general and administrative expenses 10,325 9,873 Restructuring charges 198 52 Goodwill and tradename impairment -- -- Operating income 2,114 2,235 Other income (expenses) Investment income and other 51 54 Interest expense 87 94 Earnings before income tax expense and equity in income of affiliates 2,078 2,195 Income tax expense 714 802 Equity in income of affiliates 2 1 Net earnings including noncontrolling interests 1,366 1,394 Net (earnings) attributable to noncontrolling interests 89 77 Net earnings attributable to Best Buy Co., Inc. $ 1,277 $ 1,317 Balance Sheet Feb. 26, 2011 Feb.…arrow_forwardCompute the following profitability ratios of the company for the most recent two years, show all values in the computations: 1.Asset Turnover 2.Profit margin ratio(Net Income/Net Sales) 3.Return on total assets (Net Income/Average Total Assets) 4.Return on stockholders’ equity 5.Basic Earnings per share (EPS) Based on the results above, what conclusions can you make about the company’s overall profitability and efficient use of assets?arrow_forward
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