Profitability analysis for two companies. The following data show five items from the financial statements of two companies for a recent year (amounts in millions):

Company A Company B For Year Revenues Income before Interest and Related Taxes3 Net Income to Common Shareholders'" . . .

Average during Year Total Assets Common Shareholders' Equity

$4,076 268 $4,624 772 268 761 2,472 4,392 1,903 2,595

"Net Income + [Interest Expense x (l - Tax Rate)]

"Net Income + Preferred Stock Dividends X

a. Compute the rate of return on assets for each company. Disaggregate the rate of return on assets into profit margin for ROA and total assets turnover components.

b. Compute the rate of return on common shareholders' equity for each company. Disaggregate the rate of return on common shareholders' equity into profit margin for ROCE. total assets turnover, and capital structure leverage ratio components.

c. The two companies are Harley Davidson (manufacturer of brand-name motorcycles) and Starbucks (operator of specialty retail coffee shops, primarily in rented facilities). Which of the companies corresponds to A and B? What clues did you use in reaching your conclusions?

18. /Profitability analysis for two companies. The following data show five items from the financial statements of two companies for a recent year (amounts in millions):

Company A Company B For Year Revenues Income before Interest and Related Taxes'5 Net Income to Common Shareholders" . . .

Average during Year Total Assets Common Shareholders' Equity

$30,141 $67,752 5,679 4,989 5,641 3,077 45,684 166,718 36,657 33,041 The two companies are Intel (developer and manufacturer of semiconductors) and Verizon Communications (telecommunication sen ices). Which of the companies corresponds to A and B? What clues did you use in reaching your conclusions?