Question 6 (Managerial Accounting):

• May you please review question 6 and my answers.
• Please explain them, why are they correct and why are the other choices incorrect? or if they are not correct; why is that?

Question 6 Answer saved Marked out of 3.00 \\ Flag question Comparing Operating Characteristics Across Industries Following are selected income statement and balance sheet data for companies in different industries. Cost of Stockholders' $ millions Sales Goods Sold Gross Profit Net Income Assets Liabilities Equity Target Corp. $73,785 $51,997 $21,788 $3,363 $40,262 $27,305 $12,957 Nike, Inc. 32,376 17,405 14,971 3,760 21,396 9,138 12,258 Harley- Davidson 5,995 3,620 2,375 752 9,991 8,151 1,840 Cisco Systems 49,247 18,287 30,960 10,739 121,652 58,067 63,585 (a) Compute the following ratios for each company. . Round all answers to one decimal place (percentage answer example: 0.2345 = 23.5%). . Note: The liabilities to stockholders' equity ratio should not be converted into a percentage answer (round answers to one decimal place, for example: 0.452 = 0.5). Company Gross Profit / Sales Net Income/ Sales Net Income/ Stockholders' Equity Liabilities/ Stockholders' Equity Target Corp. 29.5 % 4.6 % 26 % 2.1 Nike, Inc. 46.2 % 11.6 % 30.7 % 0.7 Harley-Davidson 39.6 % 12.5 % 40.9 % 4.4 Cisco Systems 62.9 % 21.8 % 16.9 % 0.9(b) Which ofthe following statements about business models best describes the differences in gross (and net) profit margin that we observe? The higher gross profit companies are typically those that have some competitive advantage that allows them to charge a market price for their products that cannot be easily competed away. O'l'he lower gross prot companies are those that can manufacture their products at the lowest cost. O'l'he higher gross profit companies are those that sell the highest unit volumes. Q'l'he lower gross prot companies are those that charge a higher price for their products. {c} which company reportsthe highest ratio of net income to equity? Harley-Davidson v Which ofthe following statements best describes the differences in the ratio of net income to equity that we observe? O'l'he highest return to equity companies are those that are able to keep their operating costs the lowest. O'l'he highest return on equity companies are those that maintain high levels of debt and, as a result, reduce their utilization of equity. The highest return on equity companies are those that are able to sustain some competitive advantage that leads to higher protability and are also able to minimize their use of equity. O'l'he lowest return on equity companies are those that are able to charge high prices for their products and, thus, report the highest gross prot-to-sales ratio. (d) Which company has financed itself with the highest percentage of liabilities to equity? |Harley-Davidson + Which of the following statements best describes the reason why some companies are able to take on higher levels of debt than are others? Companies that can sustain higher levels of debt generally operate in consumer products industries. Companies that can sustain higher levels of debt are typically larger companies. Companies that can sustain higher levels of debt are typically those with the most stable and positive cash flows. Companies that can sustain higher levels of debt are generally younger companies whose market values are relatively low and, as a result, cannot raise equity capital