The data in Table P2.3 are available for two companies, A and B, all stated in millions.
Question:
(a) Calculate each company's return on equity (ROE) and return on total assets (ROA).
(b) Why Company B's ROE so much higher than Company A's? Does this mean Company B is a better company? Why or why not?
(c) If Companies A and B were combined (merged), what would be the impact on the results on ROE? Under what conditions would such a combination make sense?
Data in Table P2.3
Transcribed Image Text:
Sales S 1.500,000 Manufacturing costs $ 150,000 200,000 100,000 200.000 Direct materials Direct labor Overhead Depreciation Operating expenses Equipment purchase Borrowing to finance equipment Increase in inventories Decrease in accounts receivable Increase in wages payable Decrease in notes puyable Income taxes Interest payment on financing 150,000 400,000 200.000 100,000 20,000 30,000 40,000 272,000 20,000
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 71% (14 reviews)
a b Because company has higher income but less equit...View the full answer
Answered By
Utsab mitra
I have the expertise to deliver these subjects to college and higher-level students. The services would involve only solving assignments, homework help, and others.
I have experience in delivering these subjects for the last 6 years on a freelancing basis in different companies around the globe. I am CMA certified and CGMA UK. I have professional experience of 18 years in the industry involved in the manufacturing company and IT implementation experience of over 12 years.
I have delivered this help to students effortlessly, which is essential to give the students a good grade in their studies.
3.50+
2+ Reviews
10+ Question Solved
Related Book For
Question Posted:
Related Video
The Dupont analysis is an expanded return on equity formula, calculated by multiplying the net profit margin by the asset turnover by the equity multiplier. The DuPont analysis is also known as the DuPont identity or DuPont model.This Video will guide on how to calculate return on Equity and estimate profitability of shareholders using DuPont Analysis.
Students also viewed these Accounting questions
-
The following selected liquidity and solvency ratios are available for two companies operating in the petroleum industry: Instructions Assume that you are the credit manager of the local bank. Answer...
-
The following selected liquidity and solvency ratios are available for two companies operating in the fast food industry: Instructions Assume that you are the credit manager of the local bank. Answer...
-
The following selected profitability ratios are available for two companies, BetaCom Corporation and Top Corporation, for a recent fiscal year: Instructions Which company is more profitable? Explain,...
-
The future value S of principal P invested for n years with an interest rate r% compounded annually may be calculated using the formula Rearrange this formula to express P in terms of S, r and n. S =...
-
What formula is used to gross-up supplemental payments in order to cover the taxes on the supplemental payments?
-
A copper-nickel diffusion couple similar to that shown in Figure 5.1a is fashioned. After a 700-h heat treatment at 1100?C (1373 K) the concentration of Cu is 2.5 wt% at the 3.0-mm position within...
-
Which of the following is designed to identify entry of a nonexistent customer account number? a. sequence check c. completeness check b. field check d. validity check
-
Nelson Car Audio needs 500 amplifiers to complete this months car stereo shipment. If Nelson buys rather than makes the amplifiers, some of the facilities still cannot be used in another...
-
define risks as related to global transportation and warehousing. Please provide ten examples. Please give explanation
-
At the end of June, the job cost sheets at Ace Roofers show the following costs accumulated on three jobs. Additional information a. Job 5 was started in May, and the following costs were assigned to...
-
A chemical processing firm is planning on adding a duplicate polyethylene plant at another location. The financial information for the first project year is shown in Table P2.2. (a) Compute the...
-
Table P2.4 shows financial statements for Apple Computer Corporation. The closing stock price ofr Apple was $128.24 on September 26,2008. The average number of outstanding shares was 982.11 million....
-
Assume that Rosanne Madden, CPA, is using 5% of net income before taxes, current assets, or current liabilities as her major guidelines for evaluating materiality. What qualitative factors should she...
-
Jack'sScent Shoppe is the name of a sole proprietorship that carries on a retail business. The business has a December 31 fiscal period and began in2023. In its first fiscal period?business, sales...
-
A woman sings at a fifth harmonic frequency of 3036 Hz. Treat her vocal tract as though it were a closed-open end air column and that the speed of sound is 340 m/s. 1) What would be the frequency of...
-
Factor the expression. 6x3/218x1/2 + 12x-1/2
-
Cohen Company's taxable income this year was $47,000. During the year, Cohen received interest on a municipal bond of $4,000. The company had federal income tax of $6,000 and incurred penalties of...
-
The intent of this assignment is to demonstrate that you can evaluate the riskiness of a stock using statistical analysis. An important consideration in investing is not only the expected return, but...
-
Evaluate the given determinants. -8-4 -32 16
-
Show that if A is any m n matrix, then Im A = A and AIn = A.
-
If the interest rate is 9%, what is the present value of $500 paid in year 5?
-
If the interest rate is 10.5%, what is the twoyear discount rate?
-
State the amount accumulated by each of the following present investments: (a) $6,000 in 8 years at 6% compounded annually. (b) $1,550 in 12 years at 5% compounded annually. (c) $8,000 in 32 years at...
-
A $75,000 note payable is signed on July 8 and is due in 60 days. The interest rate on the note is 4.5%. What is the maturity date of this note and what journal entry would be made to pay the note...
-
2.1 A Corporation is considering two investment options: Project A and Project B. Both projects require an initial investment of Rs. 50 crores. The cash flows for both projects are as follows:...
-
2 5 . a . Use a spreadsheet to answer this question and assume the yield curve is flat at a level of 4 % . Calculate the convexity of a bullet fixed - income portfolio, that is , a portfolio with a...
Study smarter with the SolutionInn App