Question

Which statement is TRUE? A.     When calculating return on total equity, it is normal to add...

Which statement is TRUE?

A.     When calculating return on total equity, it is normal to add back preferred dividends to net income.

B.    Return on invested capital is a better measure of profitability than earnings as earnings numbers fail to reflect the capital needed to generate those earnings.

C.      The accounting-based stock valuation formula calculates the value of a stock as the book value of the net operating assets plus the present value of future expected dividends discounted at the cost of equity.

D.      Practice considers a segment significant if its sales, operating income (or loss), or identifiable assets are 30% or more of the combined amounts of all the company's operating assets.

Homework Answers

Answer #1

Correct answer is "B". Following statement is TRUE:

B.    Return on invested capital is a better measure of profitability than earnings as earnings numbers fail to reflect the capital needed to generate those earnings.

Explanation: Statement is true because return on invested capital includes the amount of capital invested and calculates return as % of capital invested whereas the earning are just numbers they do not show any relation with capital invested.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Calculating the Average Total Assets and the Return on Assets The income statement, statement of retained...
Calculating the Average Total Assets and the Return on Assets The income statement, statement of retained earnings, and balance sheet for Somerville Company are as follows. Also, assume a tax rate of 47%. Somerville Company Income Statement For the Year Ended December 31, 20X2 Amount Percent Net sales $8,281,989 100.0% Less: Cost of goods sold (5,383,293) 65.0    Gross margin $2,898,696 35.0    Less: Operating expenses (1,323,368) 16.0    Operating income $1,575,328 19.0    Less: Interest expense (50,000) 0.6    Income before taxes $1,525,328 18.4   ...
Which of the following is the DuPont formula for return on stockholders' equity? a.Return on stockholders'...
Which of the following is the DuPont formula for return on stockholders' equity? a.Return on stockholders' equity = (Operating Income ÷ Sales) × (Average Total Assets ÷ Average Stockholders' Equity) b.Return on stockholders' equity = Profit margin × (Average Stockholders' Equity ÷ Average Total Assets) c.Return on stockholders' equity = Operating Income ÷ Average Stockholders' Equity d.Return on stockholders' equity = Common Stock + Preferred Stock + Additional Paid-in-Capital – Treasury Stock
Return on assets can be computed as Net income divided by average equity Net income divided...
Return on assets can be computed as Net income divided by average equity Net income divided by sales The profit margin ratio times the asset turnover ratio The profit margin ratio times the return on equity ratio When changing the basic EPS to the fully diluted EPS for convertible preferred stock subtract preferred stock dividends in the numerator do not subtract preferred stock dividends in the numerator the number of shares of preferred stock outstanding are added to the denominator...
Oriole Medical Comparative Balance Sheet As of December 31 2016 2015 Assets Current assets Cash $357,000...
Oriole Medical Comparative Balance Sheet As of December 31 2016 2015 Assets Current assets Cash $357,000 $417,400 Accounts receivable, net 1,065,600 776,450 Inventory 729,000 681,050 Other current assets 386,000 247,000 Total current assets 2,537,600 2,121,900 Property, plant, & equipment, net 8,574,855 8,389,815   Total assets $11,112,455 $10,511,715 Liabilities and Stockholders’ Equity Current liabilities $3,123,000 $2,846,100 Long-term debt 3,702,650 3,892,700 Total liabilities 6,825,650 6,738,800 Preferred stock, $5 par value 53,900 53,900 Common stock, $0.25 par value 195,000 103,850 Retained earnings 4,037,905 3,615,165...
Profitability Ratios The following selected data were taken from the financial statements of Vidahill Inc. for...
Profitability Ratios The following selected data were taken from the financial statements of Vidahill Inc. for December 31, 20Y7, 20Y6, and 20Y5: December 31 20Y7 20Y6 20Y5 Total assets $216,000 $195,000 $174,000 Notes payable (8% interest) 70,000 70,000 70,000 Common stock 28,000 28,000 28,000 Preferred 5% stock, $100 par 14,000 14,000 14,000 (no change during year) Retained earnings 85,310 60,130 42,000 The 20Y7 net income was $25,880, and the 20Y6 net income was $18,830. No dividends on common stock were...
The Balance Sheet and the Income Statement for ABC Manufacturing Corporation are as follows: DATA (All...
The Balance Sheet and the Income Statement for ABC Manufacturing Corporation are as follows: DATA (All amounts in SAR unless otherwise indicated, all sales are on credit and no hard keys.) Balance Sheet: ABC Corporation Balance Sheet Other current assets Total current assets Gross fixed assets Accumulated depreciation Net fixed assets Total assets LIABILITIES (DEBT) AND EQUITY Accounts payable Short-term notes payable Total current liabilities Long-term debt Total liabilities Common stock (par & paid in capital) Retained earnings Total common...
Solve the following problem. Especially Stuck on 11 Asset Turnover,12 Return on total asset and 13...
Solve the following problem. Especially Stuck on 11 Asset Turnover,12 Return on total asset and 13 Return on stockholders equity Determine the following measures for 20Y2 (round to one decimal place, including percentages, except for per-share amounts): 1. Working Capital $ 2. Current ratio 3. Quick ratio 4. Accounts receivable turnover 5. Number of days' sales in receivables 6. Inventory turnover 7. Number of days’ sales in inventory 8. Ratio of fixed assets to long-term liabilities 9. Ratio of liabilities...
QUESTION 11 What is return on assets? It is net income / total equity. It is...
QUESTION 11 What is return on assets? It is net income / total equity. It is sales / total assets. It is net income / total assets. It is sales / total equity. 1 points    QUESTION 12 Nvidia has the net profit margin of 32.20% while the industry average net profit margin is 13.51%. Based on the findings, Nvidia underperforms its peers in terms of leverage. Nvidia underperforms its peers in terms of profitability. Nvidia outperforms its peers in...
Exercise 12-10 Your answer is partially correct. Try again. Oriole Medical manufactures hospital beds and other...
Exercise 12-10 Your answer is partially correct. Try again. Oriole Medical manufactures hospital beds and other institutional furniture. The company’s comparative balance sheet and income statement for 2015 and 2016 follow. Oriole Medical Comparative Balance Sheet As of December 31 2016 2015 Assets Current assets   Cash $357,000 $417,400   Accounts receivable, net 1,065,600 776,450   Inventory 729,000 681,050   Other current assets 386,000 247,000 Total current assets 2,537,600 2,121,900 Property, plant, & equipment, net 8,574,855 8,389,815   Total assets $11,112,455 $10,511,715 Liabilities and Stockholders’...
Average Common Stockholders' Equity, Return on Stockholders' Equity Rebert Inc. showed the following balances for last...
Average Common Stockholders' Equity, Return on Stockholders' Equity Rebert Inc. showed the following balances for last year: January 1 December 31 Stockholders' equity: Preferred stock, $100 par, 8% . $ 4,000,000 $ 4,000,000 Common stock, $3 par 3,000,000 3,000,000 Additional paid-in capital* 4,800,000 4,800,000 Retained earnings 4,000,000 4,250,000 Total stockholders' equity $15,800,000 $16,050,000 * For common stock only. Rebert's net income for last year was $3,182,000. Required: 1. Calculate the average common stockholders' equity. $______ 2. Calculate the return on...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT