Survey of Accounting (Accounting I)
8th Edition
ISBN: 9781305961883
Author: Carl Warren
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 1, Problem 1.5.3MBA
To determine
Return on Assets:
It is a profitability ratio that is used to measure the net profits generated by total assets throughout the period. In simple words, it indicates the efficiency of a company in dealing its assets to earn net income. It is calculated by using following formula:
This ratio is used in comparing a company with its competitor in the industry as it shows the ability of any business to generate profits from its assets which helps investors in recognizing good stock opportunities.
To analyze:
The ranking of company A, company B and company C according to their return on assets.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
(INTU) develops and sells software products for the personal finance market, including popular titles such as Quickbooks® and TurboTax®. Classify each of the following costs and expenses for this company as either variable or fixed to the number of units produced and sold:
Packaging costs
Sales commissions
Property taxes on general offices
Shipping expenses
Straight-line depreciation of computer equipment
President’s salary
Salaries of software developers
Salaries of human resources personnel
Wages of telephone order assistants
Costs of providing online support
Users’ guides
The
Golden
Fence Company and
Stone
Wall Corporation are competitors in manufacturing walls and fences. You are interested in comparing the two firms' profitability. Their income statements and other information are presented below.
LOADING...
(Click
the icon to view the comparative income statements.)
Golden
Fence is the larger company based on sales and total assets, so you perform the following steps to compare and analyze the companies.
Read the
requirements
LOADING...
.
Requirement a. Prepare common-size income statements. Comment on differences in the relative size of each line item. (Round percentages to the nearest tenth of a percent, X.X%.)
Percent of Sales
Golden Fence
Stone Wall
Golden Fence
Stone Wall
(amounts in millions)
Company
Corporation
Company
Corporation
Sales
$987,236
$67,450
%
%
Cost of goods sold
678,626
43,370
%
%
Gross profit
308,610
24,080…
Please find the Asset Beta (IndustryBeta) based on the following information below:
Currently, Ljutic A/I Inc. has hired a consulting firm (Oakland Association-OA) to estimate the size of the market and hence expected unit sales for its main product (E-toral application sensor). OA’s work resulted in unit sales estimates of 318,331, 341,342, 368,769, 383,432, and 376,532 units respectively for the next five years conditioned on Ljutic adhering to an average sales price of $568 per unit for the first two years and $387 in years three, four, and five. From that point going forward, growth in unit sales is predicted to be 2.72% indefinitely.
The results of an independent outside analysis by a leading market research firm has determined that the company can manufacture its product line at a variable cost per unit expected to be $63.47 growing at 2.23% per year for the first 5 years and 3.17% per year indefinitely thereafter while overall fixed costs are estimated to be $10,482,000…
Chapter 1 Solutions
Survey of Accounting (Accounting I)
Ch. 1 - Prob. 1SEQCh. 1 - The resources owned by a business are called: A....Ch. 1 - A listing of a business entity’s assets,...Ch. 1 - If total assets are $20,000 and total liabilities...Ch. 1 - Prob. 5SEQCh. 1 - Prob. 1CDQCh. 1 - Prob. 2CDQCh. 1 - Prob. 3CDQCh. 1 - Prob. 4CDQCh. 1 - Prob. 5CDQ
Ch. 1 - Prob. 6CDQCh. 1 - Prob. 7CDQCh. 1 - Prob. 8CDQCh. 1 - Prob. 9CDQCh. 1 - Prob. 10CDQCh. 1 - Briefly describe the nature of the information...Ch. 1 - Prob. 12CDQCh. 1 - What particular item of financial or operating...Ch. 1 - Prob. 14CDQCh. 1 - On October 1, Wok Repair Service extended an offer...Ch. 1 - Prob. 16CDQCh. 1 - Prob. 1.1ECh. 1 - Prob. 1.2ECh. 1 - accounting equation The total assets and total...Ch. 1 - accounting equation The total assets and total...Ch. 1 - accounting equation Determine the missing amount...Ch. 1 - accounting equation Determine the missing amounts...Ch. 1 - Net income and dividends The income statement of a...Ch. 1 - Net income and stockholders’ equity for four...Ch. 1 - Accounting equation and Income statement Staples,...Ch. 1 - Prob. 1.10ECh. 1 - Income statement items Based on the data presented...Ch. 1 - Financial statement items Identify each of the...Ch. 1 - Statement of stockholders’ equity Financial...Ch. 1 - Income statement Maynard Services was organized on...Ch. 1 - Prob. 1.15ECh. 1 - Balance sheets, net income Financial information...Ch. 1 - Financial statements Each of the following items...Ch. 1 - Statement of cash flows Indicate whether each of...Ch. 1 - Prob. 1.19ECh. 1 - Statement of cash flows Looney Inc. was organized...Ch. 1 - Prob. 1.21ECh. 1 - Financial statement items Amazon.com, Inc., (AMZN)...Ch. 1 - Income statement Based on the Amazon.com, Inc.,...Ch. 1 - Financial statement items Though the McDonald’s...Ch. 1 - Financial statements Outlaw Realty, organized...Ch. 1 - Accounting concepts Match each of the following...Ch. 1 - Prob. 1.27ECh. 1 - Income statement, retained earnings statement, and...Ch. 1 - Income statement, retained earnings statement, and...Ch. 1 - Income statement, retained earnings statement, and...Ch. 1 - Prob. 1.2.1PCh. 1 - Missing amounts from financial statements Obj.4...Ch. 1 - Income statement, retained earnings statement, and...Ch. 1 - Income statement, retained earnings statement, and...Ch. 1 - Income statement, retained earnings statement, and...Ch. 1 - Statement of cash flows The following cash data...Ch. 1 - Financial statements, including statement of cash...Ch. 1 - Financial statements, including statement of cash...Ch. 1 - Financial statements, including statement of cash...Ch. 1 - Financial statements, including statement of cash...Ch. 1 - Quantitative metrics Interpublic Group of...Ch. 1 - Prob. 1.1.2MBACh. 1 - Quantitative metrics JetBlue Airways Corporation...Ch. 1 - Prob. 1.2.2MBACh. 1 - Return on assets The financial statements of The...Ch. 1 - Prob. 1.3.2MBACh. 1 - Prob. 1.3.3MBACh. 1 - Prob. 1.3.4MBACh. 1 - Return on assets The financial statements of The...Ch. 1 - Return on assets The financial statements of The...Ch. 1 - Return on assets The financial statements of The...Ch. 1 - Return on assets The following data (in millions)...Ch. 1 - Return on assets The following data (in millions)...Ch. 1 - Return on assets The following data (in millions)...Ch. 1 - Prob. 1.4.4MBACh. 1 - Return on assets The following data (in millions)...Ch. 1 - Return on assets Pfizer Inc. (PFE) discovers,...Ch. 1 - Return on assets Pfizer Inc. (PFE) discovers,...Ch. 1 - Prob. 1.5.3MBACh. 1 - Prob. 1.6.1MBACh. 1 - Return on assets ExxonMobil Corporation (XOM)...Ch. 1 - Return on assets ExxonMobil Corporation (XOM)...Ch. 1 - Return on assets Tiffany & Co. (TIF) designs and...Ch. 1 - Return on assets Tiffany & Co. (TIF) designs and...Ch. 1 - Prob. 1.1CCh. 1 - Ethics and professional conduct in business...Ch. 1 - Prob. 1.2.2CCh. 1 - How businesses make money Assume that you are the...Ch. 1 - How businesses make money Assume that you are the...Ch. 1 - How businesses make money Assume that you are the...Ch. 1 - Prob. 1.4CCh. 1 - The accounting equation Review financial...Ch. 1 - Prob. 1.6C
Knowledge Booster
Similar questions
- Analy_ze the benefits and challenges associated with the adoption of digital financial products from the perspectives of customers and financial institutions. Supp_ort you_r analysis with real-world examples. Inc_lude pro_per ref_eren_ces.arrow_forwardTRUE OR FALSE: Read each sentence carefully and determine whether the statement True or False. Write your answers in the space provided before the number. 1. Financial statement analysis uses computational and analytical techniques to evaluate the company's risks, performance, financial health, and future prospects with the objective of making economic decisions. 2. Return on asset is an operational efficiency ratio. 3. Profitability ratios measure the ability of the company's assets to generate sales. 4. Gross profit margin provides an indication of the company's average pricing policy 5. Given equal gross profit margin, the company with the lower operating income margin has higher operating expenses as a percentage of sales and has leaner operations. Written Works Below are the comparative Statement of Comprehensive Income & Statement of Financial Position of Ellane Company & Lanie Company: Statement of Comprehensive Income Ellane Company 2013 Melanie Company 2014 2013 2014 Net Sales…arrow_forwardSonos, Incorporated designs, develops, manufactures, and sells multi-room audio products. The Sonos sound system provides customers with an immersive listening experience created by the design of its speakers and components, a proprietary software platform, and the ability to stream content from a variety of sources over the customer's wireless network or over Bluetooth. In an earlier year, it reported the following on its income statement (dollars in millions). Net sales Costs and expenses Cost of sales Research and development Selling, general, and administrative Operating income (loss) Interest and other incone (expenses), net Loss before provision for income taxes Provision for income taxes Net loss The company's beginning and ending assets were $762 and $816, respectively. Transaction a b. $ 1,326 Required: Listed here are hypothetical additional transactions. Assuming that they also occurred during the fiscal year, complete the following tabulation, indicating the sign of the…arrow_forward
- Write a one-half page report comparing Kampa and Arbor using the available information. Your discussion should include their ability to use assets efficiently to produce profits. Also comment on their success in employing financial leverage in 2006arrow_forwardOperating, Investing, and Financing Activities The following is information about three different companies. 1. Noon Wakeup Company is a software game development company that creates titles for the Android operating system. The company recently launched its first software title. The company is expanding its operations by hiring additional developers and administrative staff. Noon Wakeup is not yet profitable, but it expects to show a profit within 2 years. Investors view the company as being on the cutting edge with its technology and have continued to invest in the company. Noon Wakeup has not yet borrowed money, but is considering doing so in the future. 2. Steel Grid Company is a textile company located in Waynesboro, NC. The company is experiencing its 20th year of profitability. Management is concerned by the recent economic downturn in the textile business, which has hurt sales in the 3 most recent fiscal years. Next year the company expects to just break even. For this reason, the company is not expanding and is only replacing fully depreciated equipment in its machine intensive manufacturing business. Steel Grid- pridcs itself in paying dividends and having no debt on its balance sheet. 3. Device Driver Company is a technology manufacturing company located in Bloomington, IN. The company has just introduced its 10th new product and is the leader in market share for its industry. The company continues to invest in new equipment and property and to expand by purchasing its competitors. The company has yet to pay dividends, but it is considering doing so in the future. The companys largest current asset is cash, as a result of its high profit margin; because of this, the company has no need for external sources of cash. Required: For each company, prepare a report examining whether you think the companys current cash flows from each activity (operating, investing, and financing) will be positive (the activity provides cash) or negative (the activity uses cash). Provide support for your answers.arrow_forwardGoogle Inc. is a technology company specializing in Internet-related products and services, including its famous web search engine. Whirlpool Corp. manufactures home appliances including laundry appliances, refrigerators, and dishwashers. Google has a market - to - book ratio of 3.8. Based on your knowledge of the industries in which these two companies compete, and the determinants of the M/B ratio, would you estimate that Whirlpool's market-to - book ratio is O A. less than Google's M/B ratio of 3.8 O B. approximately equal to Google's M/B ratio of 3.8 O C. greater than Google's M/B ratio of 3.8arrow_forward
- Title: Financial Metrics Self-Assessment Objective: To evaluate your understanding of financial metrics used to evaluate business performance. Instructions: Review the following financial metrics: Return on Investment (ROI) Residual Income Profit Margin Asset Turnover Minimum Required Income For each financial metric, answer the following questions: ● Whatisthedefinitionofthefinancialmetric? ● Howisitcalculated?arrow_forwardCarson Electronics’ management has long viewed BGT Electronics as an industry leader and uses this firm as a model firm for analyzing its own performance. The balance sheet and income statements for the two firms are as follows: Calculate the following ratios for both Carson and BGT: a) Debt ratio: b) Average collection period: c) Fixed asset turnover: d) Return on equity:arrow_forwardHh3. Ehlo Company is a multiproduct firm. Presented below is information concerning one of its products, the Hawkeyearrow_forward
- Here you will find some income statements and balance sheets for Sears Holdings (SHLD) and Taget Corp (TGT). Assume that you are a financial manager at Sear and want to compare your firm’s situation with that of Target. Calculate represenatative ratios for liquidity, asset management efficiency, financial leverage (capital structure), and profitability for both Sears and Target. How would you summarize the financial performance of Sears compared to target (its benchmark firm)? Include Sears and Targets current ratio, acid-test ratio, average collection period, accounts receivable turnover, inventory turnover, debt ratio, timed interest earned, total asset turnover, fixed asset turnover, gross profit margin, operating profit margin, net profit margin, operating return on assets, and return on equity.arrow_forwardQuestion:1) These three Companies Artistic Denim Mills Ltd, Faisal Spinning Millis Ltd., And the Feroze 1888 Mills Ltd as attached data in image You are required to comment/analyze specifically the following aspects Of these companies.i) Chosen companies leverage.ii) Debt management.iii) DuPont variants i.e., profitability, asset efficiency, and leverage.2) Also draw strength from market intelligence, if, you have or are able to obtain about the chosen companies(s) and is worth explanation. Such information typically may include major expansion project initiated during the last two yearsarrow_forwardAnalyze and compare Amazon.com, Best Buy, and Wal-Mart Amazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. Best Buy Co., Inc. (BBY) is a leading retailer of consumer electronics and media products in the United States, while Wal-Mart Stores, Inc. (WMT) is the leading retailer in the United States. Amazon, Best Buy, and Wal-Mart compete in similar markets. Best Buy and Wal-Mart sell through both traditional retail stores and the Internet, while Amazon sells only through the internet. Sales and cash flow information from recent annual reports for all three companies is as follows (in millions): Amazon Best Buy Wal-Mart Sales $135,987 $39,403 $485,873 Cash flows from operating activities 16,443 2,545 31,530 Purchases of property, plant, and equipment (6,737) (582) (10,619) a. Determine the free cash flow for all three companies. Amazon: Best Buy: Wal-Mart: b. Compute the ratio of free cash flow to sales for all three companies. Round percentages…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning