Financial Accounting (12th Edition) (What's New in Accounting)

12th Edition

ISBN: 9780134725987

Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.

Publisher: PEARSON

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Textbook Question

Chapter 12, Problem 12.56AP

LO 1, 2, 4

(Learning Objectives 1, 2, 4: Calculate trend percentages, return on sales, asset turnover, and ROA and compare with industry averages) Net sales, net income and total assets for Azul Shipping, Inc., for a five-year period follow:

Chapter 12, Problem 12.56AP, LO 1, 2, 4 (Learning Objectives 1, 2, 4: Calculate trend percentages, return on sales, asset

Requirements

1. Calculate trend percentages for each item for 2015 through 2018. Use 2014 as the base year and round to the nearest percent
2. Calculate the rate of return on net sales for 2016 through 2018, rounding to three decimal places. Explain what this means
3. Calculate asset turnover for 2016 through 2018 Explain what this means
4. Use a DuPont Analysis to calculate the rate of return on average total assets (ROA) for 2016 through 2018.
5. How does Azul Shipping’s return on net sales for 2018 compare with previous years? How does it compare with that of the industry? In the shipping industry, rales above 9% are considered good, and rates above 11% are outstanding
6. Evaluate the company’s ROA for 2018, compared with previous years and against an 18% benchmark for the industry

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Chapter 12, Problem 12.55Q

Chapter 12, Problem 12.57AP

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(Learning Objective 7: Calculate return on assets) Handley Grocery Corporationreported the following information in its comparative financial statements for the fiscal yearended January 31, 2018:January 31,2018January 31,2017Net sales....................................Net earnings..............................Average total assets...................$50,000$ 2,200$40,000$48,350$ 2,100$39,300Requirements1. Compute the net profit margin ratio for the years ended January 31, 2018, and 2017. Did itimprove or worsen in 2018?2. Compute asset turnover for the years ended January 31, 2018, and 2017. Did it improve orworsen in 2018?3. Compute return on assets for the years ended January 31, 2018, and 2017. Did it improveor worsen in 2018? Which component—net profit margin ratio or asset turnover—wasmostly responsible for the change in the company’s return on assets?

(Learning Objective 7: Calculate return on assets) Hometown Supply Companyreported the following information in its comparative financial statements for the fiscal yearended January 31, 2018:January 31,2018January 31,2017Net sales....................................Net earnings..............................Average total assets...................$84,000$ 4,200$70,000$82,600$ 4,050$69,450Requirements1. Compute the net profit margin ratio for the years ended January 31, 2018, and 2017. Did itimprove or worsen in 2018?2. Compute asset turnover for the years ended January 31, 2018, and 2017. Did it improve orworsen in 2018?3. Compute return on assets for the years ended January 31, 2018, and 2017. Did it improveor worsen in 2018? Which component—net profit margin ratio or asset turnover—wasmostly responsible for the change in the company’s return on assets?

Learning Objective 7: Calculate return on assets) In 2018, Ambrosia Corporation LO 7reported $100 million in sales, $18 million in net income, and average total assets of $200 million.What is Ambrosia’s return on assets in 2018?

Chapter 12 Solutions

Financial Accounting (12th Edition) (What's New in Accounting)

Ch. 12 - Prob. 1QC Ch. 12 - Prob. 2QC Ch. 12 - Prob. 3QC Ch. 12 - Prob. 4QC Ch. 12 - Expressing accounts receivable as a percentage of...Ch. 12 - Kincaid Company reported the following data (in...Ch. 12 - Prob. 7QC Ch. 12 - Ratios that measure liquidity include all of the...Ch. 12 - Verba Corporation has an inventory turnover of 15...Ch. 12 - The measure of a companys ability to collect cash...

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Solution Summary: The author explains that Trend Analysis is a form of horizontal analysis. It calculates the rate of return on sales by dividing the difference between net income and preferred dividends by net sales.

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