Duks Corporation and llewes Corporation, two corporations of roughly the same asset turnover ratio. size, are both involved in the manufacture ot canoes and sea kayaks. Each company depreciates us plant assets using the straight-line method. An investigation o\ their financial statements reveals the following information.

Instructions

(a) For each company, calculate (1) the asset turnover ratio and (2) the return on assets ratio.

(b) l mi i> Based on your calculations in part (a), comment on the relative effectiveness of the two companies in using their assets to generate sales and produce net income.

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Net income Sales Average total assets Plant assets Dirks Corp. $ 400,000 1,200,000 2,000,000 1,500,000 Hewes Corp. $ 450,000 1,140,000 1,500,000 800,000