Question

Collin Company		Ratio	Clayton Company
2011	2010		2011	2010
42%	37%	Return on Assets	34%	27%
22 times	33 times	Price/Earnings Ratio	52 times	38 times
31 days	29 days	Days' Receivables O/S	59 days	55 days
4%	6%	Percent Uncollectible	2%	4%
29%	21%	Operating Cash Index	18%	20%

a. Which statement is true regarding the Price/Earnings Ratio?

Clayton performed worse in 2011 than in 2010.

Both companies performed worse in 2011 than in 2010.

Collin performed worse in 2011 than in 2010.

Collin performed better than Clayton in 2011.

b.

Which statement is true regarding the Percent Uncollectible?

Clayton performed worse in 2011 than in 2010.

Collin performed worse in 2011 than Clayton.

Both companies performed worse in 2011 than in 2010.

Collin performed better than Clayton both years.

c. Which statement is true regarding Return on Assets?

Collin’s performance was worse in 2011 than in 2010.

Collin’s performance was better in 2011 than in 2010.

Clayton’s performance was worse in 2011 than in 2010.

Neither company performed better in 2011 than in 2010.

Answer 1

Answers : -

1) Collins performed better than Clayton in 2011.

All the ratios of the Collins is better than Clayton even receivables collection period is less than Clayton. Only the uncollectible percent is better for Clayton compared to Collins

2) Collin performed worse than Clayton in 2011.

As compared to Clayton, the uncollectible percent of the Clayton is less than Collin in both the years.

3) Collin's performance was better in 2011 than in 2010.

The return on asset for Collin increased in 2011 by 5%.