HORNGREN'S FINANCIAL & MANGERIAL ACCOUNT
7th Edition
ISBN: 9780136505273
Author: MILLER-NOBLES
Publisher: PEARSON
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Chapter 10, Problem 10QC
To determine
Rate of return on the total assets is the ratio of the net income, and interest expense to the average total assets. The rate of return on total assets measures the efficiency of the business. It measures how efficiently the business is using its total assets in generating the income.
The rate of return on the total assets is calculated as follows:
To compute: The rate of return on the total assets of Company P.
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The 2017 annual report of Tootsie Roll Industries contains the following information.
(in millions)
December 31, 2017
0000
December 31, 2016
Total assets
$930.9
$920.1
Total liabilities
197.1
208.6
Net sales
515.7
517.4
Net income
80.7
67.2
Instructions
Compute the following ratios for Tootsie Roll for 2017.
a. Asset turnover.
b. Return on assets.
c. Profit margin on sales.
d. How can the asset turnover be used to compute the return on assets?
Financial information for Powell Panther Corporation is shown below:
Powell Panther Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)
2018
2017
Sales
$
1,800.0
$
1,500.0
Operating costs excluding depreciation and amortization
1,395.0
1,275.0
EBITDA
$
405.0
$
225.0
Depreciation and amortization
43.0
39.0
Earnings before interest and taxes (EBIT)
$
362.0
$
186.0
Interest
40.0
33.0
Earnings before taxes (EBT)
$
322.0
$
153.0
Taxes (40%)
128.8
61.2
Net income
$
193.2
$
91.8
Common dividends
$
174.0
$
73.0
Powell Panther Corporation: Balance Sheets as of December 31 (Millions of Dollars)
2018
2017
Assets
Cash and equivalents
$
23.0
$
18.0
Accounts receivable
248.0
225.0
Inventories
396.0
360.0
Total current assets
$
667.0
$
603.0
Net plant and equipment
429.0
390.0
Total assets
$
1,096.0
$
993.0
Liabilities and Equity
Accounts…
Financial information for Powell Panther Corporation is shown below:
Powell Panther Corporation: Income Statements for Year Ending December 31 (Millions of Dollars)
2018
Sales
$
1,625.0
$
2017
1,300.0
Operating costs excluding depreciation and amortization
1,300.0
1,105.0
EBITDA
$
325.0
$
195.0
Depreciation and amortization
39.0
31.0
Earnings before interest and taxes (EBIT)
$
286.0
$
164.0
Interest
36.0
29.0
Earnings before taxes (EBT)
$
250.0
$
135.0
Taxes (40%)
100.0
54.0
Net income
$
150.0
$
81.0
Common dividends
$
135.0
$
65.0
Powell Panther Corporation: Balance Sheets as of December 31 (Millions of Dollars)
2018
Assets
Cash and equivalents
$
23.0
$
2017
18.0
Accounts receivable
164.0
143.0
Inventories
343.0
312.0
Total current assets
$
530.0
$
473.0
Net plant and equipment
390.0
312.0
Total assets
$
920.0
$
785.0
Liabilities and Equity…
Chapter 10 Solutions
HORNGREN'S FINANCIAL & MANGERIAL ACCOUNT
Ch. 10 - Prob. 1QCCh. 10 - Which of the following investments is most likely...Ch. 10 - If Intervale Railway invests 100,000 in 5% bonds...Ch. 10 - Prob. 4QCCh. 10 - Prob. 5QCCh. 10 - Prob. 6QCCh. 10 - Prob. 7QCCh. 10 - Harvard Co. purchased a trading investment on...Ch. 10 - Prob. 9QCCh. 10 - Prob. 10QC
Ch. 10 - What is a debt security?Ch. 10 - Prob. 2RQCh. 10 - Prob. 3RQCh. 10 - Briefly describe the five specific types of debt...Ch. 10 - How is the purchase of a held-to-maturity debt...Ch. 10 - Prob. 6RQCh. 10 - What method is used for investments in equity...Ch. 10 - What method is used for investments in equity...Ch. 10 - What adjustment must be made at the end of the...Ch. 10 - Where on the financial statements is an unrealized...Ch. 10 - Prob. 11RQCh. 10 - Prob. 12RQCh. 10 - Prob. 13RQCh. 10 - What does the rate of return on total assets...Ch. 10 - Identifying why companies invest and classifying...
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