The financial statements of three companies

Question

Rate of Return: Comparison of Different Companies

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	$8824	$9000	$11742
Income before interest And related taxes 1	615	1043	611
Net income to common Shareholders 2	477	974	503
Average during the year
Total assets	9073	6833	7163
Common shareholders Equity	2915	3494	2888

¹Net income + Interest expense × (1 ? tax rate)

²Net 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, enter answer as a decimal carried out to two decimal places. For example: .51.

	Return on Sales	Asset Turnover Ratio
Company A	%	times
Company B	%	times
Company C	%	times