/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} 17BP_c Assume the following data for Ca... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 2: 17BP_c (page 80)

Assume the following data for Cable Corporation and Multi-Media Inc.

Capable corporation

Muli-media inc

Net income

\(31,200

\)140,000

Sales

317,000

2,700,000

Total assets

402,000

965,000

Total debts

163,000

542,000

Stockholder鈥檚 equity

239,000

423,000

c. Discuss the factors from part b that added or detracted from one firm

having a higher return on stockholders鈥� equity than the other firm as

computed in part a.

Short Answer

Expert verified

The return on stockholder鈥檚 equity of Multimedia Incorporation is more than that of Cable corporation because the return on the sales of Capable corporation has a higher return than Multimedia Incorporation (9.84% vs. 5.19%).

However, Multimedia Incorporation has a higher return than Capable corporation on total assets (14.51% versus 7.76%) because the total asset turnover of Multimedia Incorporation is more than that of the Cable Corporation (279.79% versus 78.86%). This factor alone leads to a higher return on total assets.

Step by step solution

01

Comparison of return on stockholder’s equity from part a

Capable corporation

Multimedia Incorporation

Return on stockholder鈥檚 Equity

13.05%

33.10%

Return on stockholder鈥檚 equity of multimedia Incorporation is more than that of Capable corporation because the net income of multimedia incorporation is more than that of Capable corporation.

02

Comparison of other variables from part b

Capable corporation

Multimedia Incorporation

Net income to sales

9.84%

5.19%

Net Income to total assets

7.76%

14.51%

Sales to total assets

78.86%

279.79%

Net income to sales of Multimedia incorporation is less than that of Capable corporation due to the increase in the sale of Multimedia incorporation.

Net income to total assets of multimedia incorporation is more than that of Capable corporation because the total assets of Multimedia incorporation are more than that of Capable corporation.

In addition, sales to total assets of Multimedia incorporation are more than that of Capable corporation because the net sales of Multimedia incorporation are more than that of Capable corporation.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Stein Books Inc. sold 1,900 finance textbooks for \(250 each to High Tuition University in 20X1. These books cost \)210 to produce. Stein Books spent \(12,200 (selling expense) to convince the university to buy its books. Depreciation expense for the year was \)15,200. In addition, Stein Books borrowed $104,000 on January 1, 20X1, on which the company paid 12 percent interest. Both the interest and principal of the loan were paid on December 31, 20X1. The publishing firm鈥檚 tax rate is 30 percent. Did Stein Books make a profit in 20X1? Please verify with an income statement.

Dr. Zhiva虁go Diagnostics Corp.鈥檚 income statement for 20X1 is as follows

Sales\( 2790000
Cost of goods sold1790000
Gross profits\) 1000000
Selling and administrative expenses302000
Operating profits\( 698000
Interest Expense54800
Income before tax\) 643200
Taxes 30%192960
Income after tax$ 450240

b. Assume that in 20X2, sales increase by 10 percent and cost of goods sold increases by 20 percent. The firm is able to keep all other expenses the same. Assume a tax rate of 30 percent on income before taxes. What is income after taxes and the profit margin for 20X2?

Given the following information, prepare an income statement for the Dental Drilling Company.

Selling and administrative expenses

$112,000

Depreciation expenses

73,000

Sales

489,000

Interest expenses

45,000

Cost of goods sold

156,000

Taxes

47,000

Frantic Fast Foods had earnings after taxes of $420,000 in 20X1 with 309,000 shares outstanding. On January 1, 20X2, the firm issued 20,000 new shares. Because of the proceeds from these new shares and other operating improvements, earnings after taxes increased by 30 percent.

a. Compute earnings per share for the year 20X1.

b. Compute earnings per share for the year 20X2.

Inflation can have significant effects on income statements and balance sheets, and therefore on the calculation of ratios. Discuss the possible impact of inflation on the following ratios, and explain the direction of the impact based on your assumptions. (LO3-5)

d. Debt-to-assets ratio
See all solutions

Recommended explanations on Business Studies Textbooks

Managers

Read Explanation

Strategic Direction

Read Explanation

Finance Literacy (Business Studies)

Read Explanation

Organizational Communication

Read Explanation

Business Data Analytics

Read Explanation

Project Planning & Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.