Question

Quantum Moving Company has the following data. Industry information also is shown.      Company data (in...

Quantum Moving Company has the following data. Industry information also is shown.
    

Company data (in M of AED)

Industry Data on

Year

Net Income

Total Assets

Net Income/Total Assets

2014

AED

420

AED

2,840

14.0

%

2015

420

3,260

12.8

2016

410

3,830

11.9

  

  1. Calculate the company's data in terms Return On Assets Ratio for every year (2014, 2015 and 2016). (1.5 marks)
  1. As an industry analyst comparing the firm to the industry, explain the trend of these ratios and indicate whether these ratios are favorable/unfavorable in comparison to the Industry Average.


  1. Recommend what the company should do to improve its ratios. (State one factor that could help increase ROA).

Homework Answers

Answer #1
Return on assets=Net income/Total assets
2014 2015 2016
Net income a 420 420 420
Total assets b 2840 3260 3830
Return on assets a/b 14.8% 12.9% 11.0%
Return on assets-Industry 14.0% 12.8% 11.9%
Return on assets is decreasing from 2014 to 2016
While comparing to industry,This ratio is favorable in 2014 and 2015.But unfavorable in 2016.
To improve ratio
1) Increase net income
2) Reduce total assets
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