The following data show five items from the financial statements of three companies for a recent year (amounts in millions):
|
Company A |
|
Company B |
|
Company C |
| For the Year |
|
|
|
|
|
|
|
|
| Revenues |
$8,854 |
|
|
$9,400 |
|
|
$11,754 |
|
| Income before interest and related taxes1 |
645 |
|
|
1,017 |
|
|
610 |
|
| Net income to common shareholders2 |
453 |
|
|
982 |
|
|
495 |
|
| Average during the Year |
|
|
|
|
|
|
|
|
| Total assets |
9,013 |
|
|
6,838 |
|
|
7,135 |
|
| Common shareholders' equity |
2,700 |
|
|
3,490 |
|
|
2,840 |
|
1.Net income + Interest expense × (1 ? tax rate)
2.Net income ? Preferred stock dividends
Required:
A. Compute the rate of return on assets for each company. Carry out all computations to four decimal places. Then, convert the final answer to a percent. For example: 825/1630 =.5062 is carried out to four decimal places and then entered as 50.62. Do not enter a percentage sign in your answer.
|
Return on Assets |
| Company A: |
% |
| Company B: |
% |
| Company C: |
% |
Separate the rate of return on assets into the return on sales and the asset turnover ratio. Carry out all computations to four decimal places. For return on sales, convert the final answer to a percent. For example: 825/1630 =.5062 is carried out to four decimal places and then entered as 50.62. For asset turnover, round your answer to two decimal places. For example: .51.
|
Return on Sales |
Asset Turnover Ratio |
| Company A |
% |
times |
| Company B |
% |
times |
| Company C |
% |
times |
B. The three companies are an airline, a pharmaceutical company, and a retail department store. Which of the companies are most likely to correspond to A, B, and C, respectively?
| Company A |
|
| Company B |
|
| Company C |