a)
Fixed Cost: Fixed costs refer to the costs involved in the production that remain the same and do not change irrespective of changes in the volume of production.
Variable Cost: Variable costs refer to the costs involved in the production, which vary as per the changes in the volume of production.
To Explain: Investor Services and Advisor Services as referred to in a brokerage company like Company CS.
b)
To Enlist: The examples for variable cost and fixed cost in investor services segment.
c)
To Estimate: The contribution margin for each segment, assuming that
d)
To Estimate: The decline in operating income if Company CS decides to the sell the Advisor services business.
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Chapter 24 Solutions
Financial & Managerial Accounting
- Required information [The following information applies to the questions displayed below.] CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below: Sales Net operating income Average operating assets $ 4,500,000 270, 000 900,000 2$ 24 The following questions are to be considered independently. ces Required: 1. Compute the company's return on investment (ROI). (Do not round intermediate calculations. Round your answer to 2 decimal places.) Return on investment (ROI)arrow_forwardAnalyze and compare Bank of America and Wells Fargo Bank of America Corporation (BAC) and Wells Fargo Company (WFC) are two large financial services companies. The following data (in millions) were taken from a recent years financial statements for both companies: a. Compute the earnings per share for both companies. Round to the nearest cent. a. Which company appears to be more profitable on an earnings-per-share basis? b. Which company would you expect to have the larger quoted market price?arrow_forwardIf given the opportunity, in which of the firms would you invest based on the result of your analysis of both companies and the comparison with the industry? If you would not invest, explain your reasons according to the results obtained. Company Name: Year 2018 Chemicals and Allied Products Industry Ratios ………….. Solvency or Debt Ratios Merck J&J 2018 Debt ratio 0.67 0.61 0.47 Debt-to-equity ratio 0.93 0.51 0.38 Interest coverage ratio 12.27 18.91 -9.43 Liquidity Ratios Current ratio 1.17 1.47 3.47 Quick ratio 0.92 1.16 2.12 Cash ratio 0.40 0.63 2.24 Profitability Ratios Profit margin 14.64% 18.75% -93.4% ROE (Return on equity), after tax 23.03% 25.60% -248.5 ROA (Return on assets) 7.49% 10.00% -146.5 Gross margin 68.06% 66.79% 55.3% Operating margin (Return on sales) 19.62% 24.27%…arrow_forward
- Performing vertical analysis The Randall Department Stores, Inc. chief executive officer (CEO) has asked you to compare the company’s profit performance and financial position with the averages for the industry. The CEO has given you the company’s income statement and sheet as well as the industry average data for retailers. Requirements Prepare a vertical analysis for Randall for both its income statement and balance sheet. 2 Compare the company’s profit performance and financial position with the average for the industry.arrow_forwardBackground: Star Ltd is a UK-based medium sized enterprise manufacturing and selling artificial intelligence (AI) based smart toys for the local market. You as the Assistant to the Chief Financial Officer (CFO) have been asked to write a report on the financial performance by using basic ratios analysis tools for the Chief Financial officer. The company’s financial statements as well as the Industry Average Ratios are provided as follows. Star Ltd Statement of Financial Position as on 31 December 2021 Fixed Assets: £,000 Owner’s equity £,000 Machinery 120,000 Equity and Reserves 100,000 Equipment 80000 Non-current liabilities: Current assets: Long term debt 120,000 Inventory 60,000 Current Liabilities Cash 90,000 Accounts payable…arrow_forwardBenchmark analysis: Trademark Corp.'s financial manager collected the following information for its peer group to compare its performance against that of its peers. Ratios Trademark Peer Group DSO 33.5 days 27.9 days Total assets turnover 2.3 3.7 Inventory turnover 1.8 2.8 Quick ratio 0.6 1.3 (a) Explain how Trademark is performing relative to its peers. (b) How do the industry ratios help Trademark's management?arrow_forward
- Segment Revenue Vertical Analysis Newton Corporation is one of the world's largest entertainment companies that includes Gravity films, Apple Broadcasting, Gravity News, the GR, and various satellite properties. The company provided revenue disclosures by its major product segments in the notes to its financial statements as follows: a. Using the revenue disclosures by major product segment listed below, provide a vertical analysis of the product segment revenues. Round all percents to one decimal place. For a Recent Year Major Product Segments (in millions) Percent (%) Cable Network Programming $23,925 Television 8,338 Filmed Entertainment 5,154 Direct Broadcast Satellite Television 4,483 Total revenues of major segments $41,900 %arrow_forwardSpecialty Department Stores chief executive officer (CEO) has asked you to compare the company's profit performance and financial position with the average for the industry. The CEO has given you the company's income statement and balance sheet, as well as the industry average data for retailers. Assets \table[[Current assets, %,.71.1%arrow_forward[The following information applies to the questions displayed below.] CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below: Sales Net operating income Average operating assets $ 4,700,000 $ 188,000 $ 940,000 The following questions are to be considered independently. Required: 1. Compute the company's return on investment (ROI). (Do not round intermediate calculations. Round your answer to 2 decimal places.) Return on investment (ROI) %arrow_forward
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