Survey of Accounting (Accounting I)
8th Edition
ISBN: 9781337517386
Author: WARREN
Publisher: Cengage
expand_more
expand_more
format_list_bulleted
Question
Chapter 1, Problem 1.5.3MBA
To determine
Return on Assets:
It is a profitability ratio that is used to measure the net profits generated by total assets throughout the period. In simple words, it indicates the efficiency of a company in dealing its assets to earn net income. It is calculated by using following formula:
This ratio is used in comparing a company with its competitor in the industry as it shows the ability of any business to generate profits from its assets which helps investors in recognizing good stock opportunities.
To analyze:
The ranking of company A, company B and company C according to their return on assets.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Trimax Solutions develops software to support e-commerce. Trimax incurs substantial computer software development costs as well as substantial research and development (R&D) costs related to other aspects of its product line. Under GAAP, if certain conditions are met, Trimax capitalizes software development costs but expenses the other R&D costs. The following information is taken from Trimax’s annual reports ($ in thousands):
R&Dcosts....................... Netincome....................... Totalassets(atyear-end) ........... Equity(atyear-end)................ Capitalized software costs
Unamortized balance (at year-end) . . Amortization expense . . . . . . . . . . . .
Required:
1999
$ 400 312 3,368 2,212
20 4
2000
$ 491 367 3,455 2,460
31 7
2001
$ 216 388 3,901 2,612
2002
$ 212 206 4,012 2,809
2003
$ 355 55 4,045 2,889
31 13
2004
$ 419 81 4,077 2,915
42 15
2005
$ 401 167 4,335 3,146
43 15
2006
$ 455 179 4,650 3,312
36 14
27 22 9 12
CHECK
(a) Year2006,$7
CHECK
(e)…
AT&T and Verizon produce and market telecommunications products and are competitors. Key financial figures for these businesses for a recent year follow.Compute return on assets for (a) AT&T and (b) Verizon.
AT&T and Verizon produce and market telecommunications products and are competitors. Key financial figures for these businesses for a recent year follow. Key Figures ($ 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?
Chapter 1 Solutions
Survey of Accounting (Accounting I)
Ch. 1 - Prob. 1SEQCh. 1 - The resources owned by a business are called: A....Ch. 1 - A listing of a business entity’s assets,...Ch. 1 - If total assets are $20,000 and total liabilities...Ch. 1 - Prob. 5SEQCh. 1 - Prob. 1CDQCh. 1 - Prob. 2CDQCh. 1 - Prob. 3CDQCh. 1 - Prob. 4CDQCh. 1 - Prob. 5CDQ
Ch. 1 - Prob. 6CDQCh. 1 - Prob. 7CDQCh. 1 - Prob. 8CDQCh. 1 - Prob. 9CDQCh. 1 - Prob. 10CDQCh. 1 - Briefly describe the nature of the information...Ch. 1 - Prob. 12CDQCh. 1 - What particular item of financial or operating...Ch. 1 - Prob. 14CDQCh. 1 - On October 1, Wok Repair Service extended an offer...Ch. 1 - Prob. 16CDQCh. 1 - Prob. 1.1ECh. 1 - Prob. 1.2ECh. 1 - accounting equation The total assets and total...Ch. 1 - accounting equation The total assets and total...Ch. 1 - accounting equation Determine the missing amount...Ch. 1 - accounting equation Determine the missing amounts...Ch. 1 - Net income and dividends The income statement of a...Ch. 1 - Net income and stockholders’ equity for four...Ch. 1 - Accounting equation and Income statement Staples,...Ch. 1 - Prob. 1.10ECh. 1 - Income statement items Based on the data presented...Ch. 1 - Financial statement items Identify each of the...Ch. 1 - Statement of stockholders’ equity Financial...Ch. 1 - Income statement Maynard Services was organized on...Ch. 1 - Prob. 1.15ECh. 1 - Balance sheets, net income Financial information...Ch. 1 - Financial statements Each of the following items...Ch. 1 - Statement of cash flows Indicate whether each of...Ch. 1 - Prob. 1.19ECh. 1 - Statement of cash flows Looney Inc. was organized...Ch. 1 - Prob. 1.21ECh. 1 - Financial statement items Amazon.com, Inc., (AMZN)...Ch. 1 - Income statement Based on the Amazon.com, Inc.,...Ch. 1 - Financial statement items Though the McDonald’s...Ch. 1 - Financial statements Outlaw Realty, organized...Ch. 1 - Accounting concepts Match each of the following...Ch. 1 - Prob. 1.27ECh. 1 - Income statement, retained earnings statement, and...Ch. 1 - Income statement, retained earnings statement, and...Ch. 1 - Income statement, retained earnings statement, and...Ch. 1 - Prob. 1.2.1PCh. 1 - Missing amounts from financial statements Obj.4...Ch. 1 - Income statement, retained earnings statement, and...Ch. 1 - Income statement, retained earnings statement, and...Ch. 1 - Income statement, retained earnings statement, and...Ch. 1 - Statement of cash flows The following cash data...Ch. 1 - Financial statements, including statement of cash...Ch. 1 - Financial statements, including statement of cash...Ch. 1 - Financial statements, including statement of cash...Ch. 1 - Financial statements, including statement of cash...Ch. 1 - Quantitative metrics Interpublic Group of...Ch. 1 - Prob. 1.1.2MBACh. 1 - Quantitative metrics JetBlue Airways Corporation...Ch. 1 - Prob. 1.2.2MBACh. 1 - Return on assets The financial statements of The...Ch. 1 - Prob. 1.3.2MBACh. 1 - Prob. 1.3.3MBACh. 1 - Prob. 1.3.4MBACh. 1 - Return on assets The financial statements of The...Ch. 1 - Return on assets The financial statements of The...Ch. 1 - Return on assets The financial statements of The...Ch. 1 - Return on assets The following data (in millions)...Ch. 1 - Return on assets The following data (in millions)...Ch. 1 - Return on assets The following data (in millions)...Ch. 1 - Prob. 1.4.4MBACh. 1 - Return on assets The following data (in millions)...Ch. 1 - Return on assets Pfizer Inc. (PFE) discovers,...Ch. 1 - Return on assets Pfizer Inc. (PFE) discovers,...Ch. 1 - Prob. 1.5.3MBACh. 1 - Prob. 1.6.1MBACh. 1 - Return on assets ExxonMobil Corporation (XOM)...Ch. 1 - Return on assets ExxonMobil Corporation (XOM)...Ch. 1 - Return on assets Tiffany & Co. (TIF) designs and...Ch. 1 - Return on assets Tiffany & Co. (TIF) designs and...Ch. 1 - Prob. 1.1CCh. 1 - Ethics and professional conduct in business...Ch. 1 - Prob. 1.2.2CCh. 1 - How businesses make money Assume that you are the...Ch. 1 - How businesses make money Assume that you are the...Ch. 1 - How businesses make money Assume that you are the...Ch. 1 - Prob. 1.4CCh. 1 - The accounting equation Review financial...Ch. 1 - Prob. 1.6C
Knowledge Booster
Similar questions
- Operating, Investing, and Financing Activities The following is information about three different companies. 1. Noon Wakeup Company is a software game development company that creates titles for the Android operating system. The company recently launched its first software title. The company is expanding its operations by hiring additional developers and administrative staff. Noon Wakeup is not yet profitable, but it expects to show a profit within 2 years. Investors view the company as being on the cutting edge with its technology and have continued to invest in the company. Noon Wakeup has not yet borrowed money, but is considering doing so in the future. 2. Steel Grid Company is a textile company located in Waynesboro, NC. The company is experiencing its 20th year of profitability. Management is concerned by the recent economic downturn in the textile business, which has hurt sales in the 3 most recent fiscal years. Next year the company expects to just break even. For this reason, the company is not expanding and is only replacing fully depreciated equipment in its machine intensive manufacturing business. Steel Grid- pridcs itself in paying dividends and having no debt on its balance sheet. 3. Device Driver Company is a technology manufacturing company located in Bloomington, IN. The company has just introduced its 10th new product and is the leader in market share for its industry. The company continues to invest in new equipment and property and to expand by purchasing its competitors. The company has yet to pay dividends, but it is considering doing so in the future. The companys largest current asset is cash, as a result of its high profit margin; because of this, the company has no need for external sources of cash. Required: For each company, prepare a report examining whether you think the companys current cash flows from each activity (operating, investing, and financing) will be positive (the activity provides cash) or negative (the activity uses cash). Provide support for your answers.arrow_forwardReturn on assets Pfizer Inc. (PFE) discovers, produces, and distributes medicines, including Celebrex and Lipitor. Ford (F) Motor Co. develops, markets, and produces automobiles and trucks. Microsoft Corporation (MSFT) develops, produces. and distributes a variety of computer software and hardware products including Windows, Office, Excel, and the Xbox. Without computing thy return on assets, rank from highest to lowest Pfizer, Ford, and Microsoft in terms of their return on assets.arrow_forwardReturn on investment Commodore Entertainment has four profitable business segments, described as follows: • Media Networks: Television and radio• Parks and Resorts: Resorts, including Commodore land• Studio Entertainment: Motion pictures, musical recordings, and stage plays• Consumer Products: Character merchandising, Commodore stores, books, and magazines Commodore Entertainment recently reported sector income from operations, revenue, and invested assets as follows: Income from Operations Revenue Invested Assets Media Networks $193,644 $586,800 $978,000 Parks and Resorts 63,954 392,700 561,000 Studio Entertainment 12,927 333,600 417,000 Consumer Products 118,233 469,800 261,000 a. Use the DuPont formula to determine the return on investment for the four Commodore Entertainment sectors. Round Profit Margin and ROI to one decimal place and Investment Turnover to two decimal places. Profit Margin Investment Turnover ROI…arrow_forward
- Assume that you are purchasing an investment and have decided to invest in a company in the digital phone business. You have narrowed the choice to Digitized Corp. and Very Network, Inc. and have assembled the following data. LOADING... (Click to view the income statement data.) Data Table Selected income statement data for the current year: Digitized Very Network Net Sales Revenue (all on credit) $418,290 $494,940 Cost of Goods Sold 210,000 256,000 Interest Expense 0 15,000 Net Income 62,000 70,000 (Click to view the balance sheet and market price data.) Data Table Selected balance sheet and market price data at the end of the current year: Digitized Very Network Current Assets: Cash $24,000 $21,000 Short-term Investments 42,000 19,000 Accounts Receivables, Net 36,000 46,000 Merchandise Inventory 67,000 98,000 Prepaid Expenses 22,000 18,000 Total…arrow_forwardReturn on investment Commodore Entertainment has four profitable business segments, described as follows: • Media Networks: Television and radio• Parks and Resorts: Resorts, including Commodore land• Studio Entertainment: Motion pictures, musical recordings, and stage plays• Consumer Products: Character merchandising, Commodore stores, books, and magazines Commodore Entertainment recently reported sector income from operations, revenue, and invested assets as follows: Income from Operations Revenue Invested Assets Media Networks $163,582 $735,200 $919,000 Parks and Resorts 73,625 353,400 589,000 Studio Entertainment 16,668 324,100 463,000 Consumer Products 80,164 352,800 196,000 a. Use the DuPont formula to determine the return on investment for the four Commodore Entertainment sectors. Round Profit Margin and ROI to one decimal place and Investment Turnover to two decimal places. Profit Margin Investment Turnover ROI…arrow_forwardAT&T and Verizon produce and market telecommunications products and are competitors. Key financial figures for these businesses for a recent year follow. Which company is more successful in returning net income from its assets invested?arrow_forward
- Coca-Cola and PepsiCo both produce and market beverages that are direct competitors. Key financialfigures for these businesses for a recent year follow.Key Figures ($ millions) Coca-Cola PepsiCoSales . $46,542 $66,504Net income . 8,634 6,462Average assets . . . . . . . . . . . . . . . . . . . . 76,448 70,518Required Which company is more successful in returning net income from its assets invested?arrow_forwardAnalyze and compare Alphabet (Google) and Microsoft Alphabet Inc. (GOOG) and Microsoft Corporation (MSFT) design and distribute consumer and enterprise software, including overlaps in search, business productivity, and mobile operating systems. Alphabets primary source of revenue is from advertising, while Microsofts is from software subscription and support fees. The following year-end data (in millions) were taken from recent balance sheets for both companies: a. Compute the working capital for each company for both years. b. Which company has the larger working capital at the end of Year 2? c. Is working capital a good measure of relative liquidity in comparing the two companies? Explain. d. Compute the current ratio for both companies. Round to one decimal place. e. Which company has the larger relative liquidity based on the current ratio? f. Based on your analysis, comment on the short-term debt-paying ability of these two companies.arrow_forwardCoca-Cola and PepsiCo both produce and market beverages that are direct competitors. Key financialfigures for these businesses for a recent year follow.Key Figures ($ millions) Coca-Cola PepsiCoSales . $46,542 $66,504Net income . 8,634 6,462Average assets . . . . . . . . . . . . . . . . . . . . 76,448 70,518Required Compute return on assets for (a) Coca-Cola and (b) PepsiCo.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_forwardReturn on investment The Walt Disney Company (DIS) has four business segments, described as follows: • Media Networks: Television and radio• Parks and Resorts: Resorts, including Disneyland• Studio Entertainment: Motion pictures, musical recordings, and stage plays• Consumer Products & Interactive Media: Character merchandising, Disney stores, books, and games Disney recently reported segment operating income, revenue, and invested assets (in millions) as follows: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_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage LearningAccounting (Text Only)AccountingISBN:9781285743615Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
- Corporate Financial AccountingAccountingISBN:9781305653535Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Accounting (Text Only)
Accounting
ISBN:9781285743615
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Corporate Financial Accounting
Accounting
ISBN:9781305653535
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning