Fundamental Accounting Principles
Fundamental Accounting Principles
24th Edition
ISBN: 9781259916960
Author: Wild, John J., Shaw, Ken W.
Publisher: Mcgraw-hill Education,
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Chapter 15, Problem 3AA

Requirement-1:

To determine

To Calculate:

The Return on Total Assets of Samsung for the two most recent years

Requirement-1:

Expert Solution
Check Mark

Answer to Problem 3AA

The Return on Total Assets of Samsung for the two most recent years is as follows:

    Samsung
    Current Year1 Year Prior
    Return on Total Assets15.0%9.0%

Explanation of Solution

The Return on Total Assets of Samsung for the two most recent years is calculated as follows:

    Samsung
    In MillionsCurrent Year1 Year Prior
    Net Income (A)
    42,186,747
    22,726,092
    Beginning Total Assets (B)
    262,174,324
    242,179,521
    Ending Total Assets (C)
    301,752,090
    262,174,324
    Average Total Assets (D) = (B+C)/2 =
    281,963,207
    252,176,923
    Return on Total Assets =(A/D) =15.0%9.0%

Concept Introduction:

Return on total Assets:

The Return on total assets is profitability ratio that measures the percentage of profit earned on average assets invested in the business. Return on asset is calculated by dividing the net income by average total assets. The formula to calculate Return on assets is as follows:

  Return on assets = Net incomeAverage Total Assets 

Note: Average total assets are calculated as an average of beginning and ending total assets. The formula to calculate the average total assets is as follows:

  Average total Assets = (Beginning total assets + Ending total assets)2 

Profit Margin Ratio:

Profit Margin Ratio is a profitability ratio that represents the percentage income earned on the sales. It is calculated by dividing the Net Income by the Sales. The formulas to calculate the Profit margin is as follows:

  Profit Margin = Operating IncomeSales 

Asset Turnover Ratio:

Asset Turnover Ratio is an efficiency ratio that represents the sales earned on the average assets invested in the business. It is calculated by dividing the Sales by Average total assets. The formulas to calculate the Asset Turnover Ratio is as follows:

  Asset Turnover Ratio = SalesAverage total assets 

Requirement-2:

To determine

If Return on Total Assets of Samsung for current year is better or worse than Apple and Google

Requirement-2:

Expert Solution
Check Mark

Answer to Problem 3AA

The Return on Total Assets of Samsung for current year is better than Apple and Google both.

Explanation of Solution

The Return on Total Assets of Samsung, Apple and Google for the Current year is calculated as follows:

    SamsungAppleGoogle
    In MillionsCurrent YearCurrent YearCurrent Year
    Net Income (A)
    42,186,747
    48,351
    12,662
    Beginning Total Assets (B)
    262,174,324
    321,686
    167,497
    Ending Total Assets (C)
    301,752,090
    375,319
    197,295
    Average Total Assets (D) = (B+C)/2 =
    281,963,207
    348,503
    182,396
    Return on Total Assets =(A/D) =15.0%13.9%6.9%

The Return on Total Assetsof Samsung is highest for the current year; hence return on Total Assets of Samsung for current year is better than Apple and Google both.

Concept Introduction:

Return on total Assets:

The Return on total assets is profitability ratio that measures the percentage of profit earned on average assets invested in the business. Return on asset is calculated by dividing the net income by average total assets. The formula to calculate Return on assets is as follows:

  Return on assets = Net incomeAverage Total Assets 

Note: Average total assets are calculated as an average of beginning and ending total assets. The formula to calculate the average total assets is as follows:

  Average total Assets = (Beginning total assets + Ending total assets)2 

Profit Margin Ratio:

Profit Margin Ratio is a profitability ratio that represents the percentage income earned on the sales. It is calculated by dividing the Net Income by the Sales. The formulas to calculate the Profit margin is as follows:

  Profit Margin = Operating IncomeSales 

Asset Turnover Ratio:

Asset Turnover Ratio is an efficiency ratio that represents the sales earned on the average assets invested in the business. It is calculated by dividing the Sales by Average total assets. The formulas to calculate the Asset Turnover Ratio is as follows:

  Asset Turnover Ratio = SalesAverage total assets 

Requirement-3:

To determine

To Calculate:

The Profit Margin of Samsung for the current year

Requirement-3:

Expert Solution
Check Mark

Answer to Problem 3AA

The Profit Margin of Samsung for the current year is 17.6%

Explanation of Solution

The Profit Margin of Samsung for the current year is calculated as follows:

    Samsung
    In MillionCurrent Year
    Net Income (A)
    42,186,747
    Net Sales (B)
    239,575,376
    Profit Margin (C) = A/B =17.6%

Concept Introduction:

Return on total Assets:

The Return on total assets is profitability ratio that measures the percentage of profit earned on average assets invested in the business. Return on asset is calculated by dividing the net income by average total assets. The formula to calculate Return on assets is as follows:

  Return on assets = Net incomeAverage Total Assets 

Note: Average total assets are calculated as an average of beginning and ending total assets. The formula to calculate the average total assets is as follows:

  Average total Assets = (Beginning total assets + Ending total assets)2 

Profit Margin Ratio:

Profit Margin Ratio is a profitability ratio that represents the percentage income earned on the sales. It is calculated by dividing the Net Income by the Sales. The formulas to calculate the Profit margin is as follows:

  Profit Margin = Operating IncomeSales 

Asset Turnover Ratio:

Asset Turnover Ratio is an efficiency ratio that represents the sales earned on the average assets invested in the business. It is calculated by dividing the Sales by Average total assets. The formulas to calculate the Asset Turnover Ratio is as follows:

  Asset Turnover Ratio = SalesAverage total assets 

Requirement-4:

To determine

To Calculate:

The Total Asset Turnover of Samsung for the current year

Requirement-4:

Expert Solution
Check Mark

Answer to Problem 3AA

The Total Asset Turnover of Samsung for the current year is 0.85

Explanation of Solution

The Total Asset Turnover of Samsung for the current year is calculated as follows:

    Samsung
    In MillionCurrent Year
    Net Income (A)
    42,186,747
    Net Sales (B)
    239,575,376
    Profit Margin (C) = A/B =17.6%
    Beginning Total Assets (D)
    262,174,324
    Ending Total Assets (E)
    301,752,090
    Average Total Assets (F) = (D+E)/2 =
    281,963,207
    Asset Turnover Ratio (G) = B/F=0.85

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Chapter 15 Solutions

Fundamental Accounting Principles

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