Problem:
Omni Technology Holding Company has the following three affiliates:
|
Software |
Personal Computers |
Foreign Operations |
| Sales |
$40,000,000 |
$60,000,000 |
$100,000,000 |
| Net income (after Taxes) |
$2,000,000 |
2,000,000 |
8,000,000 |
| Assets |
5,000,000 |
25,000,000 |
60,000,000 |
| Stockholdes equity |
4,000,000 |
10,000,000 |
50,000,000 |
a. Which affiliate has the highest return on sales?
b. Which affiliate has the lowest return on assets?
c. Which affiliate has the highest total asset turnover?
d. Which affiliate has the highest return on stockholders’ equity?
e. Which affiliate has the highest debt ratio? (Assets minus stockholders’ equity equals debt.)
f. Returning to question b, explain why the software affiliate has the highest return on total assets.
g. Returning to question d, explain why the personal computer affiliate has a higher return on stockholders’ equity than the foreign operations affiliate even though it has a lower return on total assets.