Nina Company and Vernon Corporation, two corporations of roughly the same size.

asset turnover ratio. are both involved in the manufacture of in-line skates. Each company depreciates its plant assets using the straight-line method. An investigation of 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) I l ll l 1> 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 Nina Co. Vernon Corp. $ 750,000 $1,000,000 1.200.000 1,100,000 2.500,000 2,000,000 1,800,000 1,000,000