Financial Accounting
15th Edition
ISBN: 9781337272124
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 10, Problem 25E
FedEx Corporation and United Parcel Service, Inc. compete in the package delivery business. The major fixed assets for each business include aircraft, sorting and handling facilities, delivery vehicles, and information technology. The sales and average book value of fixed assets reported on recent financial statements for each company were as follows:
- a. Compute the fixed asset turnover ratio for each company. Round to one decimal place.
- b. Which company appears more efficient in using fixed assets?
- c. Interpret the meaning of the ratio for the more efficient company.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Read the following case and compute the fixed asset turnover ratio.Explain in your own words how the result of the turnover ratio of both companies is interpreted.La Flor de Mayo and La Rosa del Monte compete in the moving service sector. The greatest assets of these companies are moving trucks, warehouses and technological equipment. Sales and the average book value of fixed assets (book value) reported in the latest financial statements of each company is as follows:
La Flor de Mayo
La Rosa del Monte
Sales (in millions)
$12,320
$15,500
Average book value of fixed assets (in millions)
$7,000
$8,300
Three major segments of the transportation industry are motor carriers such as YRC Worldwide, railroads such as Union Pacific, and transportation logistics services such as C.H. Robinson Worldwide, Inc. Recent financial statement information for these three companies follows (in thousands):
YRC
Union Pacific
C.H. Robinson
Sales
$5,092,000
$22,832,000
$16,631,172
Average total assets
1,601,300
58,476,500
4,331,623
a. Determine the asset turnover for all three companies. Round your answers to one decimal place.
YRC
fill in the blank 1
Union Pacific
fill in the blank 2
C.H. Robinson
fill in the blank 3
b. The ratio of sales to assets measures the number of sales dollars earned for each dollar of assets. The greater the number of sales dollars earned for every dollar of assets, the
efficient a firm is in using assets.
Three major segments of the transportation industry are motor carriers, such as Atlantic; railroads, such as Pacific; and transportation arrangement services, such as Mediterranean. Recent financial statement information for these three companies is shown as follows (in thousands of dollars):
Atlantic
Pacific
Mediterranean
Sales
$3,736,923
$4,993,352
$1,909,372
Average total assets
795,090
1,314,040
561,580
a. Determine the asset turnover for all three companies. Round to one decimal place.
Atlantic
fill in the blank 1
Pacific
fill in the blank 2
Mediterranean
fill in the blank 3
b. The ratio of sales to assets measures the number of sales dollars earned for each dollar of assets. The greater the number of sales dollars earned for every dollar of assets, the efficient a firm is in using assets.
Chapter 10 Solutions
Financial Accounting
Ch. 10 - ONeil Office Supplies has a fleet of automobiles...Ch. 10 - Prob. 2DQCh. 10 - Prob. 3DQCh. 10 - Keyser Company purchased a machine that has a...Ch. 10 - Is it necessary for a business to use the same...Ch. 10 - a. Under what conditions is the use of the...Ch. 10 - Prob. 7DQCh. 10 - Immediately after a used truck is acquired, a new...Ch. 10 - Prob. 9DQCh. 10 - Prob. 10DQ
Ch. 10 - A building acquired at the beginning of the year...Ch. 10 - Equipment acquired at the beginning of the year at...Ch. 10 - A truck acquired at a cost of 69,000 has an...Ch. 10 - A tractor acquired at a cost of 420,000 has an...Ch. 10 - A building acquired at the beginning of the year...Ch. 10 - A building acquired at the beginning of the year...Ch. 10 - Equipment with a cost of 180,000 has an estimated...Ch. 10 - A truck with a cost of 82,000 has an estimated...Ch. 10 - On February 14, Garcia Associates Co. paid 2,300...Ch. 10 - On August 7, Green River Inflatables Co. paid...Ch. 10 - Equipment was acquired at the beginning of the...Ch. 10 - Equipment was acquired at the beginning of the...Ch. 10 - Prob. 7PEACh. 10 - Prob. 7PEBCh. 10 - On December 31, it was estimated that goodwill of...Ch. 10 - On December 31, it was estimated that goodwill of...Ch. 10 - Prob. 9PEACh. 10 - Prob. 9PEBCh. 10 - Prob. 1ECh. 10 - Prob. 2ECh. 10 - Prob. 3ECh. 10 - Tri-City Ironworks Co. reported 44,500,000 for...Ch. 10 - Convert each of the following estimates of useful...Ch. 10 - A refrigerator used by a wholesale warehouse has a...Ch. 10 - A diesel-powered tractor with a cost of 90,000 and...Ch. 10 - Prior to adjustment at the end of the year, the...Ch. 10 - A Kubota tractor acquired on January 8 at a cost...Ch. 10 - A storage tank acquired at the beginning of the...Ch. 10 - Equipment acquired at a cost of 105,000 has an...Ch. 10 - A building with a cost of 1,200,000 has an...Ch. 10 - US Freight Lines Co. incurred the following costs...Ch. 10 - Jackie Fox owns and operates Platinum Transport...Ch. 10 - Quality Move Company made the following...Ch. 10 - Willow Creek Company purchased and installed...Ch. 10 - Equipment acquired on January 8 at a cost of...Ch. 10 - Equipment acquired on January 6 at a cost of...Ch. 10 - Prob. 19ECh. 10 - Kleen Company acquired patent rights on January 10...Ch. 10 - Prob. 21ECh. 10 - List the errors you find in the following partial...Ch. 10 - Amazon.com, Inc. is the worlds leading Internet...Ch. 10 - Verizon Communications Inc. is a major...Ch. 10 - FedEx Corporation and United Parcel Service, Inc....Ch. 10 - The following table shows the sales and average...Ch. 10 - Prob. 27ECh. 10 - Prob. 28ECh. 10 - Prob. 29ECh. 10 - On October 1, Bentley Delivery Services acquired a...Ch. 10 - The following payments and receipts are related to...Ch. 10 - Dexter Industries purchased packaging equipment on...Ch. 10 - Perdue Company purchased equipment on April 1 for...Ch. 10 - New lithographic equipment, acquired at a cost of...Ch. 10 - The following transactions and adjusting entries...Ch. 10 - Prob. 6PACh. 10 - Prob. 1PBCh. 10 - Waylander Coatings Company purchased waterproofing...Ch. 10 - Layton Company purchased tool sharpening equipment...Ch. 10 - New tire retreading equipment, acquired at a cost...Ch. 10 - Prob. 5PBCh. 10 - Prob. 6PBCh. 10 - Prob. 1CPCh. 10 - Prob. 2CPCh. 10 - Godwin Co. owns three delivery trucks. Details for...Ch. 10 - The following is an excerpt from a conversation...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Compare Fed Ex and UPS FedEx Corporation (FDX) and United Parcel Service, Inc. (UPS) compete in the package delivery business. The major fixed assets for each business include aircraft, sorting and handling facilities, delivery vehicles, and information technology. The sales and average book value of fixed assets reported on recent financial statements for each company were as follows: a. Compute the fixed asset turnover ratio for each company. Round to one decimal place. b. Which company appears more efficient in using fixed assets? c. Interpret the meaning of the ratio for the more efficient company.arrow_forwardAnalyze and compare CSX, Union Pacific, and YRC Worldwide CSX Corporation (CSX) and Union Pacific Corporation (UNP) are major railroads, operating primarily in the eastern and western portion of the United States, respectively. YRC Worldwide Inc. (YRCW) is one of the largest trucking companies in the United States. The sales and total assets (in millions) for a recent year for each company are as follows: a. Compute the asset turnover ratio for each company. Round to two decimal places. b. Which of the two railroad companies is more efficient in generating revenues from its assets? c. How does YRCs asset turnover ratio compare to the two railroads? Why?arrow_forwardAsset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has invested in a particular type of asset (or group of assets) to the amount of revenues the asset is generating. Examples of asset management ratios include the average collection period (also called the days sales outstanding ratio), the inventory turnover ratio, the fixed asset turnover ratio, and the total asset turnover ratio. Consider the following case: Walker Telecommunications has a quick ratio of 2.00x, $35,550 in cash, $19,750 in accounts receivable, some inventory, total current assets of $79,000, and total current liabilities of $27,650. The company reported annual sales of $200,000 in the most recent annual report. Additionally, the company’s cost of goods sold is 75% of sales. Over the past year, how often did Walker Telecommunications sell and replace its inventory? 8.01x 2.86x 6.33x 6.96x The inventory turnover…arrow_forward
- Asset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has invested in a particular type of asset (or group of assets) to the amount of revenues the asset is generating. Examples of asset management ratios include the average collection period (also called the days sales outstanding ratio), the inventory turnover ratio, the fixed asset turnover ratio, and the total asset turnover ratio. Consider the following case: Walker Telecommunications has a quick ratio of 2.00x, $35,550 in cash, $19,750 in accounts receivable, some inventory, total current assets of $79,000, and total current liabilities of $27,650. The company reported annual sales of $200,000 in the most recent annual report. Over the past year, how often did Walker Telecommunications sell and replace its inventory? 8.01x 8.44x 9.28x 2.86x The inventory turnover ratio across companies in the telecommunications industry is…arrow_forwardAsset management ratios are used to measure how effectively a firm manages its assets, by relating the amount a firm has invested in a particular type of asset (or group of assets) to the amount of revenues the asset is generating. Examples of asset management ratios include the average collection period (also called the days sales outstanding ratio), the inventory turnover ratio, the fixed asset turnover ratio, and the total asset turnover ratio. Consider the following case: Walker Telecommunications has a quick ratio of 2.00x, $35,550 in cash, $19,750 in accounts receivable, some inventory, total current assets of $79,000, and total current liabilities of $27,650. The company reported annual sales of $200,000 in the most recent annual report. Over the past year, how often did Walker Telecommunications sell and replace its inventory? A---8.01x B---2.86x C---9.28x D---8.44x The inventory turnover ratio across companies in the telecommunications industry is 9.284x. Based on this…arrow_forwardthe following information was drawn from the balance sheets of the kansas and montana companies: current assets: kansas-54,000 montana- 76,000 current liabilites: kansas-27000 montana-30400 a. compute the current ration for each company. b. which company has the greater likelihood of being able to pay its bills? c. assume that both companies have the same amount of total assets. Speculate as to which company would produce the higher return on assets ratio?arrow_forward
- The Home Depot reported the following data (in millions) in its recent financial statements: a. Determine the asset turnover for The Home Depot for Year 2 and Year 1. Round to two decimal places. b. What conclusions can be drawn concerning the trend in the ability of The Home Depot to effectively use its assets to generate sales?arrow_forwardLast Resort Industries Inc. is a privately held diversified company with five separate divisions organized as investment centers. A condensed income statement for the Specialty Products Division for the past year, assuming no support department allocations, along with asset information is as follows: The manager of the Specialty Products Division was recently presented with the opportunity to add an additional product line, which would require invested assets of 14,400,000. A projected income statement for the new product line is as follows: The Specialty Products Division currently has 27,000,000 in invested assets, and Last Resort Industries Inc.s overall return on investment, including all divisions, is 10%. Each division manager is evaluated on the basis of divisional return on investment. A bonus is paid, in 8,000 increments, for each whole percentage point that the divisions return on investment exceeds the company average. The president is concerned that the manager of the Specialty Products Division rejected the addition of the new product line, even though all estimates indicated that the product line would be profitable and would increase overall company income. You have been asked to analyze the possible reasons the Specialty Products Division manager rejected the new product line. a. Determine the return on investment for the Specialty Products Division for the past year. b. Determine the Specialty Products Division managers bonus for the past year. c. Determine the estimated return on investment for the new product line. Round percentages to one decimal place and the investment turnover to two decimal places. d. Why might the manager of the Specialty Products Division decide to reject the new product line? Support your answer by determining the projected return on investment for 20Y6, assuming that the new product line was launched in the Specialty Products Division and 20Y6 actual operating results were similar to those of 20Y5. e. Suggest an alternative performance measure for motivating division managers to accept new investment opportunities that would increase the overall company income and return on investment.arrow_forwardWhich of the following statements is true? a. The fixed asset turnover ratio assists managers in determining the estimated future capital expenditures that are needed. b. The average age of the fixed assets is computed by dividing accumulated depreciation by depreciation expense. c. If net sales increases, the fixed asset turnover ratio will decrease. d. A relatively low fixed asset turnover ratio signals that a company is efficiently using its assets.arrow_forward
- Amazon.com, Inc. is the worlds leading Internet retailer of merchandise and media. Amazon also designs and sells electronic products, such as e-readers. Netflix, Inc. is the worlds leading Internet television network. Both companies compete in the digital media and streaming space. However, Netflix is more narrowly focused in the digital streaming business than is Amazon. Sales and average book value of fixed assets information (in millions) are provided for Amazon and Netflix for a recent year as follows: a. Compute the fixed asset turnover ratio for each company. Round to one decimal place. b. Which company is more efficient in generating sales from fixed assets? c. Interpret your results.arrow_forwardThe income statement comparison for Forklift Material Handling 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 return on investment. Was the decision to invest additional assets in the company successful? Explain. D. Assuming an 8% cost of capital, calculate the residual income for each year. Explain how this compares to your findings in part C.arrow_forwardThree major segments of the transportation industry are motor carriers such as Atlantic Worldwide, railroads such as Pacific, and transportation logistics services such as Mediterranean. Recent financial statement information for these three companies follows (in thousands): Atlantic Pacific Mediterranean Sales $1,602,930 $892,080 $2,142,260 Average total assets 763,300 1,274,400 498,200 a. Determine the asset turnover for all three companies. Round your answers to two decimal places. Atlantic fill in the blank 1 Pacific fill in the blank 2 Mediterranean fill in the blank 3arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Financial Accounting
Accounting
ISBN:9781337272124
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,
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
How To Analyze an Income Statement; Author: Daniel Pronk;https://www.youtube.com/watch?v=uVHGgSXtQmE;License: Standard Youtube License