Chapter 2: 29BP_b (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
b. Which division has the highest return on assets?

Short Answer

Expert verified

The return on assets of the Medical supplies is the highest.

Step by step solution

Return on assets of medical supplies

$\begin{array}{rcl} Return on assets & = & \frac{Net income}{Total assets} \\ = & \frac{$ 1, 700, 000}{$ 8, 340, 000} \\ = & 20.38 % \end{array}$

Return on assets of heavy machinery

$\begin{array}{rcl} Return on assets & = & \frac{Net income}{Total assets} \\ = & \frac{$ 592, 000}{$ 8, 760, 000} \\ = & 6.76 % \end{array}$

Return on assets of Electronics

$\begin{array}{rcl} Return on assets & = & \frac{Net income}{Total assets} \\ = & \frac{$ 402, 000}{$ 3, 570, 000} \\ = & 11.26 % \end{array}$

Hence, Medical supplies has the higher return on assets.

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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

Times mirror and glass company
Sales	\(126,000
Less: Cost of goods sold	93,000
Gross profit	\)33,000
Less: selling and administrative expenses	11,000
Lease Expenses	4,000
Operating profit*	\(18,000
Less: Interest expenses	3,000
Earning before taxes	\)15,000
Less: Taxes (30%)	4,500
Earning after taxes	$10,500

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
b. Which division has the highest return on assets?

Short Answer

Step by step solution

Return on assets of medical supplies

Return on assets of heavy machinery

Return on assets of Electronics

One App. One Place for Learning.

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	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

The Global Products Corporation has three subsidiaries.Medical suppliesHeavy machineryElectronicsSales\(20,040,000\)5,980,000$4,730,000Net Income (after tax)1,700,000592,000402,000Assets8,340,0008,760,0003,570,000b. Which division has the highest return on assets?

Short Answer

Step by step solution

Return on assets of medical supplies

Return on assets of heavy machinery

Return on assets of Electronics

One App. One Place for Learning.

Most popular questions from this chapter

Recommended explanations on Business Studies Textbooks

Human Resources

Financial Performance

Nature of Business

Intermediate Accounting

Change Management

Business Case Studies

Study anywhere. Anytime. Across all devices.

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
b. Which division has the highest return on assets?