a.
To determine: The affiliate for the Omni Technology Holding Company that has the highest return on sales.
Introduction:
Return on sales:
It is used to compute the ratio which shows the degree to which a company makes money from its business activities. It is calculated by dividing the net income of the company by its sales.
a.
Answer to Problem 30P
The foreign operation affiliate of the Omni Technology Holding Company has the highest return on sales.
Explanation of Solution
Calculation of the return on sales for software:
Calculation of the return on sales for personal computers:
Calculation of the return on sales for foreign operations:
b.
To determine: The affiliate for the Omni Technology Holding Company that has the lowest
Introduction:
Return on assets (ROA):
It is used to compute the ratio which shows the degree to which a company makes money from its business activities. It is computed by dividing the net income of a company by its sales.
b.
Answer to Problem 30P
The personal computer affiliate of the Omni Technology Holding Company has the lowest ROA.
Explanation of Solution
Calculation of the ROA for software:
Calculation of the return on assets for personal computers:
Calculation of the return on assets for foreign operations:
c.
To determine: The affiliate for the Omni Technology Holding Company that has the highest total asset turnover.
Introduction:
Asset turnover:
It computes the competence of a firm in using its assets for the generation of the income or sales revenue for the firm.
c.
Answer to Problem 30P
The software affiliate of the Omni Technology Holding Company has the highest return on asset turnover.
Explanation of Solution
Calculation of the return on total assets turnover software:
Calculation of the return on total assets turnover for personal computers:
Calculation of the return on total assets turnover for foreign operations:
d.
To determine: The affiliate for the Omni Technology Holding Company that has the highest return on stockholder’s equity.
Introduction:
Return on stockholder’s equity:
It is the profitability ratio that computes the capability of a company to make profits out of the investments made by the shareholders in the company.
d.
Answer to Problem 30P
The software affiliate of the Omni Technology Holding Company has the highest return on the stockholder’s equity.
Explanation of Solution
Calculation of the return on stockholder’s equity for software:
Calculation of the return on stockholder’s equity for personal computers:
Calculation of the return on stockholder’s equity for foreign operations:
e.
To determine: The affiliate for the Omni Technology Holding Company that has the highest debt ratio.
Introduction:
Debt to Total Asset Ratio:
It shows the financial leverage of the company and the part of the assets of the company that are financed by the creditors.
e.
Answer to Problem 30P
The personal computer affiliate of the Omni Technology Holding Company has the highest debt to total assets ratio.
Explanation of Solution
Calculation of the debt to total assets ratio for software:
Calculation of the debt to total assets ratio for personal computers:
Calculation of the debt to total assets ratio for foreign operations:
Working Notes:
Calculation of the debt for software:
Calculation of the debt for personal computers:
Calculation of the debt for foreign operations:
f.
To explain: The reason for the highest return on asset turnover of the software affiliate of the Omni Technology Holding Company.
Introduction:
Asset turnover:
It computes the competence of a firm in using its assets for the generation of the income or sales revenue for the firm.
f.
Answer to Problem 30P
The software affiliate of the Omni Technology Holding Company has the highest return on asset because of the highest total asset turnover ratio.
Explanation of Solution
The software affiliate of the Omni Technology Company has a total asset turnover ratio that is 6.91 times. Thus, it has the highest asset turnover ratio compared to other affiliates.
g.
To explain: The reason for the higher returns on stockholder’s equity of personal computer affiliate as compared to foreign operations affiliate.
Introduction:
Return on stockholder’s equity:
It is the profitability ratio that computes the capability of a company to generate profits out of the investments made by the shareholders in the company.
g.
Answer to Problem 30P
The personal computer affiliate has a return on shareholder’s equity higher than the foreign operations affiliate because it has a higher debt ratio compared to the foreign operations affiliate.
Explanation of Solution
The debt ratio of personal computer is 60.57% and the debt ratio of foreign operations affiliate is 15.97%. Thus, personal computer affiliate has a debt ratio higher as compared to the foreign affiliate. So, it gives higher returns on stockholder’s equity on the basis of its debt ratio.
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Chapter 3 Solutions
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
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- EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT