Question
Company A Company B Cost of Building 60 90 Residual Value 6 14 Sales Revenue 72 104 Cost Of Sales (54) (78) Staff Cost (4.4)
Company A Company B
Cost of Building 60 90
Residual Value 6 14
Sales Revenue 72 104
Cost Of Sales (54) (78)
Staff Cost (4.4) (9.6)
Other Cost (2.2) (1.6)
Depreciation Straight line basis for 50 years
Company A
Annual Gross Profit = 18
Average Investment =33
Annual profit = 10.32
Accounting Rate of Return = 62.54
Company B
Annual gross Profit =26
Average Investment = 52
Annual profit = 13.28
Accounting Rate of Return = 51.08
Based on the above calculated figures, can you justify which company is more profitable for investment?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Practical Financial Management
Authors: William R. Lasher
7th edition
128560721X, 9781133593669, 1133593682, 9781285607214, 978-1133593683
