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Chapter 2: 29BP_c (page 84)

The Global Products Corporation has three subsidiaries.

Medical supplies

Heavy machinery

Electronics

Sales

\(20,040,000

\)5,980,000

$4,730,000

Net Income (after tax)

1,700,000

592,000

402,000

Assets

8,340,000

8,760,000

3,570,000

c. Compute the return on assets for the entire corporation.

Short Answer

Expert verified

The return on assets of the entire corporation is 13.03%.

Step by step solution

01

Return on assets

The return on assets is also termed as the financial ratio that shows how profitable a company is in relation to its total assets.

02

Return on assets for the entire corporation

Returnonassets=NetincomeAssets=$1,700,000+$592,000+$402,000$8,340,000+$8,760,000+$3,570,000=$2,694,000$20,670,000=13.03%

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Most popular questions from this chapter

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?

Network Communications has total assets of \(1,500,000 and current assets of \)612,000. It turns over its fixed assets three times a year. It has $319,000 of debt. Its return on sales is 8 percent. What is its return on stockholders鈥� equity?

Is there any validity in rule-of-thumb ratios for all corporations, such asa current ratio of 2 to 1 or debt to assets of 50 percent?

Arrange the following income statement items so they are in the proper order of an income statement:

Taxes

Earning per share

Share Outstanding

Earning before taxes

Interest Expense

Cost of goods sold

Depreciation Expense

Earning after taxes

Preferred Stcok dividends

Earning available to common stockholders

Sales

Selling and administrative expense

Gross profit

Question:The Haines Corp. shows the following financial data for 20X1 and 20X2:

20X1

20X2

Sales

\(3,230,000

\)3,370,000

Cost of goods sold

2,130,000

2,850,000

Gross profits

\(1,100,000

\)520,000

Selling and administrative expenses

298,000

227,000

Operating profits

\(802,000

\)293,000

Interest expense

47,200

51,600

Income before taxes

\(754,800

\)241,400

Taxes (35%)

264,180

84,490

Income after tax

\(490,620

\)156,910

For each year, compute the following and indicate whether it is increasing or

decreasing profitability in 20X2 as indicated by the ratio:

b. Selling and administrative expense to sales.
See all solutions

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