Return on Assets:
The return on assets is the return earned on the amount invested in assets. The return on assets is also known as the return on investment. In getting income individual or company will invest money; the ultimate aim is to earn a good return on the amount invested.
Net Income:
Total earning of the company is called net income of the company. When the total expense deducted from the total revenue than the resultant is net income or ne loss.Net profit of the company is also called net profit. The investor can take a decision on the basis of net income of the company. If net income is more the investor attract to the company.
1.
To compute: Return on assets of A and V Company.
2.
To compare: The performance of companies on the basis of sales.
3.
To compare: The performance of companies on the basis of net income from its asset invested.
4.
To Analyze: the company for investment purpose.
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FINANCIAL ACCOUNTING FUNDAMENTALS
- Analyze Home Depot The Home Depot (HD) reported the following data (in millions) in its recent financial statements: a. Determine the asset turnover ratio for Home Depot for Year 2 and Year 1. Round to two decimal places. b. What conclusions can be drawn from these ratios concerning the change in the ability of Home Depot to effectively use its assets to generate sales?arrow_forwardIFRS Activity 1 Unilever Group is a global company that markets a wide variety of products, including Lever® soap, Breyer’s® ice cream, and Hellman’s® mayonnaise. A recent income statement and statement of comprehensive income for the Dutch company, Unilever Group, follow: What do you think is meant by “turnover”? How does Unilever’s income statement presentation differ significantly from that of Mornin’ Joe? How is the total for net finance costs presented differently from what typically would be found under U.S. GAAP?arrow_forwardAnalyze and compare Kroger and Tiffany The Kroger Company (KR), a national supermarket chain, reported the following data (in millions) in its financial statements for a recent year: a.Compute the asset turnover ratio. Round to two decimal places. b.Tiffany Co. (TIF) is a large North American retailer of jewelry. Tiffanys asset turnover ratio is 0.78. Why would Tiffanys asset turnover ratio be lower than that of Kroger?arrow_forward
- Analyze and compare Alphabet (Google) and Microsoft Alphabet Inc. (GOOG) and Microsoft Corporation (MSFT) design and distribute consumer and enterprise software, including overlaps in search, business productivity, and mobile operating systems. Alphabets primary source of revenue is from advertising, while Microsofts is from software subscription and support fees. The following year-end data (in millions) were taken from recent balance sheets for both companies: a. Compute the working capital for each company for both years. b. Which company has the larger working capital at the end of Year 2? c. Is working capital a good measure of relative liquidity in comparing the two companies? Explain. d. Compute the current ratio for both companies. Round to one decimal place. e. Which company has the larger relative liquidity based on the current ratio? f. Based on your analysis, comment on the short-term debt-paying ability of these two companies.arrow_forwardComparing Two Companies in the Same Industry: Chipotle and Panera Bread Refer to the financial information for Chipotle and Panera Bread reproduced at the end of this book and answer the following questions: Required What is the dollar amount of inventories that each company reports on its balance sheet at the end of the most recent year? What percentage of total assets do inventories represent for each company? What does this tell you about the nature of their business? Refer to Note 1 in Chipotles annual report. What inventory valuation method does the company use? Refer to Note 2 in Panera Breads annual report. What inventory valuation method does the company use? How do both companies deal with situations in which the market value of inventory is less than its cost? Given the nature of their businesses, which inventory system, periodic or perpetual, would you expect both Chipotle and Panera Bread to use? Explain your answer.arrow_forwardRequired information Skip to question [The following information applies to the questions displayed below.] CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below: Sales $ 4,980,000 Net operating income $ 298,800 Average operating assets $ 830,000 The following questions are to be considered independently. Required: 1. Compute the company's return on investment (ROI). (Do not round intermediate calculations. Round your answer to 2 decimal places.) Return on investment (ROI) %arrow_forward
- Horizontal Analysis Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture of office supplies. To be able to assess the financial capabilities of the company, Mike has been given the company’s financial statements for the 2 most recent years. Kepler CompanyComparative Balance Sheets This Year Last Year Assets Current assets: Cash $50,000.00 $100,000.00 Accounts receivable, net 300,000.00 150,000.00 Inventory 600,000.00 400,000.00 Prepaid expenses 25,000.00 30,000.00 Total current assets $975,000.00 $680,000.00 Property and equipment, net 125,000.00 150,000.00 Total assets $1,100,000.00 $830,000.00 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $400,000.00 $290,000.00 Short-term notes payable 200,000.00 60,000.00 Total current liabilities $600,000.00 $350,000.00 Long-term bonds payable, 12% 100,000.00 150,000.00 Total liabilities $700,000.00 $500,000.00…arrow_forwardCoca-Cola and PepsiCo both produce and market beverages that are direct competitors. Key financialfigures for these businesses for a recent year follow.Key Figures ($ millions) Coca-Cola PepsiCoSales . $46,542 $66,504Net income . 8,634 6,462Average assets . . . . . . . . . . . . . . . . . . . . 76,448 70,518Required Which company is more successful in returning net income from its assets invested?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_forward
- Calculate the profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). How has the company’s profitability changed during the last year? A computer manufacturer has financial statements as follows: Income Statements for Year Ending December 31 (Thousands of Dollars) 2019 2018 Sales $945,000 $900,000 Expenses excluding depreciation and amortization 812,700 774,000 EBITDA $132,300 $126,000 Depreciation and amortization 33,100 31,500 EBIT $99,200 $94,500 Interest Expense 10,470 8,600 EBT $88,730 $85,900 Taxes (25%) 22,183 21,475 Net income $66,547 $64,425 Common dividends $56,609 $54,115 Addition to retained earnings $9,938 $10,310 Balance Sheets for Year Ending December 31 (Thousands of Dollars) Assets 2019 2018 Cash and…arrow_forwardAccounting QUESTION 3 BJs Ltd manufactures products that are used in the construction industry. The company has been successful in the management of its working capital and liquidity. However, 2020 has been different. Calculate the working capital and liquidity ratios for BJs Ltd given the following financial information The following is an extract of the trading account in the income statement: 2020 2019 R'000 R'000 Sales 2,065 1,789 Cost of sales (1,479) (1,304) Gross profit 586 485 Extract Statement From financial position Assets 2020 2019 R'000 R'000 Current Assets Inventory 119 109 Debtors (refer to note1) 401 347 Short term investments 4 19 Cash 48 48 572 523 EQUITY AND LIABILITIES Noncurrent liabilities 49 35 Taxes 62 47 Dividend 19 14 Creditors (refer to note 2) 371 324 501 420 Net current assets 71 103 Notes 1. Ammount of trades receivable in debtors amount 330 285 2.Amount of trades payables in…arrow_forwardProblem 1: Viance Queen Company Required: Compute for the company’s profitability and operating efficiency ratios for 2019 Compute for the financial health ratios of the company for 2019 A.Profitability ratio a.Gross Profit Ratio b. Operating income margin c. Net profit margin d. Return on Assets: ROA (NI/Total Assets) ROA (NI/Average Assets) ROA (EBIT/Total Assets) ROA (EBIT/Average Assets) ROE (NI/Capital) ROE (NI/Average Capital B.Operating Efficiency a. Asset Turnover b. Fixed Asset Turnover c. Inventory Turnover d. Days in Inventory e. AR Turnover f. Days in AR C.Financial Health/ (Solvency and Liquidity) Solvency ratio: a. Debt to equity ratio b. Debt Ratio c. Equity Ratio d. Interest Coverage Ratio Liquidity ratio: a. Current Ratio b. Quick Ratioarrow_forward
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