Question

Compute the Return on Total Assets for each company below. Which company has the better ratio...

Compute the Return on Total Assets for each company below. Which company has the better ratio and why? Interpret the ratio for that company in common language.

Company A Company B
Net Income 75,000 130,000
Total Assets - Beginning 100,000 250,000
Total Assets - Ending 200,000 300,000
Net Sales 500,000 600,000
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Company A:

Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2
Average Total Assets = ($100,000 + $200,000) / 2
Average Total Assets = $150,000

Return on Total Assets = Net Income / Average Total Assets
Return on Total Assets = $75,000 / $150,000
Return on Total Assets = 50%

Company B:

Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2
Average Total Assets = ($250,000 + $300,000) / 2
Average Total Assets = $275,000

Return on Total Assets = Net Income / Average Total Assets
Return on Total Assets = $130,000 / $275,000
Return on Total Assets = 47.27%

Company A has better ratio.
Company A is utilizing its total assets more efficiently than Company B.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Financial statements for AAR Company appear below: AAR Company Balance Sheet December 31 Current assets:    ...
Financial statements for AAR Company appear below: AAR Company Balance Sheet December 31 Current assets:     Cash and marketable securities $21,000     Accounts receivable, net 160,000     Inventory 300,000     Prepaid expenses          9,000       Total current assets 490,000 Noncurrent assets:     Plant & equipment, net      810,000 Total assets $1,300,000 Current liabilities:     Accounts payable $75,000     Accrued liabilities 25,000     Notes payable, short term      100,000        Total current liabilities 200,000 Noncurrent liabilities:     Bonds payable      300,000...
Question No: 2 The financial statements of Ahmed Company appear below: Ahmed Company Comparative Balance Sheet...
Question No: 2 The financial statements of Ahmed Company appear below: Ahmed Company Comparative Balance Sheet December 31, ———————————————————————————————— Assets                                                                                  2019               2018 Cash                                                                              $ 250,000     $ 400,000 Short-term investments                                              150,000 600,000 Accounts receivable (net)                                                  500,000       300,000 Inventory    500,000     700,000 Property, plant and equipment (net)                           2,600,000    3,000,000      Total assets                                                       $4,000,000   $5,000,000 Liabilities and stockholders' equity Accounts payable                                                           $ 200,000   $ 300,000 Short-term notes payable                                                   300,000         900,000 Bonds payable 900,000     1,600,000 Common stock 1,500,000     1,500,000 Retained earnings                                                          ...
CCC - Balance sheets 31 December 2018, 2017 assets 2018 2017 Fixed assets, net 600,000 500,000...
CCC - Balance sheets 31 December 2018, 2017 assets 2018 2017 Fixed assets, net 600,000 500,000 Inventory 70,000 50,000 Accounts receivable, net 100,000 150,000 Cash 30,000 50,000 Total current assets € 200,000 € 250,000 Total assets € 800,000 € 750,000 Equity and liabilities 2018 2017 Share capital 300,000 200,000 Retained earnings 80,000 100,000 Total equity € 380,000 € 300,000 Payable bonds 200,000 250,000 Accounts payable 150,000 120,000 Income taxes payable 70,000 80,000 Total current liabilities € 220,000 € 200,000 Total...
14 Compare the reasons for the changes in return on equity for Eastnorth Manufacturing and its...
14 Compare the reasons for the changes in return on equity for Eastnorth Manufacturing and its industry. Balance Sheets for INDUSTRY: December 31 2017 2016 2015 ASSETS Cash and marketable securities $30,000 $25,000 $20,000 Accounts receivable 110,000 90,000 60,000 Inventories 100,000 80,000 80,000 Total current assets 240,000 195,000 160,000 Gross plant and equipment 250,000 220,000 200,000 Less: accumulated depreciation −100,000 −65,000 −50,000 Net plant and equipment 150,000 155,000 150,000 Land 50,000 50,000 50,000 Total fixed assets 200,000 205,000 200,000 Total...
Selected data from the Carmen Company at year end are presented below: ​ Total assets $2,000,000...
Selected data from the Carmen Company at year end are presented below: ​ Total assets $2,000,000 Average total assets 2,200,000 Net income 250,000 Sales 1,300,000 Average common stockholders' equity 1,000,000 Net cash provided by operating activities 275,000 Shares of common stock outstanding 10,000 Long-term investments 400,000 Calculate: (a) asset turnover ratio; (b) return on total assets; (c) return on common stockholders' equity; and (d) earnings per share on common stock. Assume the company had no preferred stock or interest expense....
Mike Smith has the following financial data. Investment Assets at Year End $475,000 Investment Assets at...
Mike Smith has the following financial data. Investment Assets at Year End $475,000 Investment Assets at Beginning of the Year $392,000 Savings Made During the Year by Mike $27,000 Employer Match to Mike’s 401(k) Plan $5,000 Total Assets on Ending Statement of Financial Position $700,000 Gross Income on Income Statement $100,000 Total Assets on Beginning Statement of Financial Position $600,000 Total Liabilities at Beginning of the Year $200,000 Total Liabilities at Year End $180,000 What was Mike's Return on Net...
A farm business manager has just finished preparing end of year financial statements for the business....
A farm business manager has just finished preparing end of year financial statements for the business. The following financial information was determined:             Current assets – beginning of year                             $200,000             Total assets – beginning of year                                 $600,000             Current liabilities – beginning of year                        $100,000             Total liabilities – beginning of year                            $150,000             Total equity – beginning of year                                 $450.000             Current assets – end of year                                        $250,000             Total assets – end of year                                           $800,000             Current liabilities – end of year                                  $150,000                                                         Total liabilities – end of year                                      $300,000             Total equity – end...
On January 1, Year 1, Jacklin Corporation (JC) acquired 60 percent (60,000 shares of $2 par...
On January 1, Year 1, Jacklin Corporation (JC) acquired 60 percent (60,000 shares of $2 par common stock) of Mantz Corporation (MC) for $2,500,000 in cash. The acquisition date fair value of the noncontrolling interest’s shares (40 percent) was $40 per share. JC uses the Initial Value Method for its internal accounting. At the time of the acquisition MC has the following asset and liability accounts: Book Value Fair Value Difference Current Assets $ 500,000 $ 500,000 $ 0 PPE...
On January 1, 20X1, Honey Bee Corporation purchased the net assets of Green Hornet Company for...
On January 1, 20X1, Honey Bee Corporation purchased the net assets of Green Hornet Company for $1,500,000. On this date, a condensed balance sheet for Green Hornet showed: Book Fair Value Value Current Assets $ 500,000 $800,000 Long-Term Investments in Securities 200,000 150,000 Land 100,000 600,000 Buildings (net) 700,000 900,000 $1,500,000 Current Liabilities $ 300,000 $300,000 Long-Term Debt 550,000 600,000 Common Stock (no-par) 300,000 Retained Earnings 350,000 $1,500,000 Required: Record the entry on Honey Bee's books for the acquisition of...
The financial statements of Elcamino Company appear below: ELCAMINO COMPANY Comparative Balance Sheet December 31, ________________________________________________________...
The financial statements of Elcamino Company appear below: ELCAMINO COMPANY Comparative Balance Sheet December 31, ________________________________________________________ Assets                                                                                                        2017 2016    Cash ..................................................................................................    $ 25,000................................................................................................ $ 40,000 Debt investments ..............................................................................       20,000 60,000 Accounts receivable (net) .................................................................       50,000 30,000 Inventory ...........................................................................................       140,000 170,000 Property, plant and equipment (net) .................................................        170,000.............................................................................................. 200,000       Total assets ................................................................................       $405,000 $500,000 Liabilities and stockholders' equity Accounts payable .............................................................................    $ 25,000................................................................................................ $ 30,000 Short-term notes payable .................................................................       40,000...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT