Question
QUESTION Below are selected ratios for three companies which operate in three different industries: Discount Retail Store, Drug and Utility. Industry A B C COGS/Sales
QUESTION
- Below are selected ratios for three companies which operate in three different industries: Discount Retail Store, Drug and Utility.
Industry | A | B | C |
COGS/Sales | 80% | 58% | n/a |
R&D/Sales | 0% | 7% | 0.1% |
Advertising/Sales | Not defined | 3% | 0.1% |
Interest/Sales | 0.9% | 1% | 6% |
Net Income/Sales | 2.5% | 10% | 10% |
Return on Assets | 8.5% | 10.6% | 7.2% |
Inventory Turnover | 5.5 | 4 | n/a |
Accounts receivable turnover | 100 | 6 | 9 |
Long term debt/equity | 60% | 50% | 92% |
n/a= not applicable |
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Identify which industry each of the companies A, B and C operate in. Give TWO (2) reasons for each of your selections.
b) Use the following information for ABC incorporated:
Items | Value (RM000 millions) |
Assets | 200 |
Shareholder Equity | 118 |
Sales | 225 |
Net Income | 18 |
Interest Expense | 2 |
i) Discuss and appraise the value of ABC Incorporateds return on equity?
ii) Assuming net income is not given, if ABC's net profit margin is 10%, appraise the value of ABCs return on equity (ROE).
c) The Majestic Blind Co. sells its finished product for an average of $35 per unit with a variable cost per unit of $21. The company has fixed operating costs of $1,050,000.
You are required evaluate the firms operating breakeven point in units and dollars. In addition, using 100,000 units as a base, appraise the firms degree of operating leverage
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