Compute and Interpret RatiosSelected balance sheet and income statement information from Illinois Tool Works follows.$ millions2019 2018 2017Net operating profit after tax (NOPAT) $2,688 $2.792Net income2.597 2.640Total assetsEquity14,164 13,978 $15,7732,844 3.059 3.059Net operating profit after tax (NOA)Treasury stock8,337 8,894 9,48419.551 18,071 16,029a. Compute profitability measures: RNOA, ROA and ROE for 2019 and 2018 using the numbers as reported by the company.Note: Round answers to one decimal place (ex: 0.2345 = 23.5%).MetricRNOAROAROE20192018%%%b. Adjust equity and total assets for the amount of treasury stock.$ millionsAssets, restated $Equity, restated20192018S2017Using these restated numbers, recompute RNOA, ROA and ROE for both years.Note: Round answers to one decimal place (ex: 0.2345 = 23.5%).MetricRNOAROAROE20192018c. Which profitability measures (from part a or part b) better reflect the company's profit levels during the two years?Of the three measures, which one is least influenced by the company's stock repurchase activity?

b.Adjust equity and total assets for the amount of treasury stock.Equity, restated = Equity reported…

Answered: Compute and Interpret Ratios Selected…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 74E

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Ratio Analysis Rising Stars Academy provided the following information on its 2019 balance sheet and state mcnt of cash flows: Long-term debt S 4,400 Interest expense S 398 Total liabilities 8,972 Net income 559 Total assets 38,775 Interest payments 432 Total equity 29,803 Cash flows from operations 1.015 Operating income 1.223 Income tax expenses 266 Income taxes paid 150 Required: Calculate the following ratios for Rising Stars: (a) debt to equity, (b) debt to total assets, (c) long-term debt to equity, (d) times interest earned (accrual basis), and (e) times interest earned (cash basis). (Note: Round answers to three decimal places.) CONCEPTUAL CONNECTION Interpret these results. 3.What does it mean if a bond is callable
Income Statement for Year Ended December 31, 2018 (Millions of Dollars) Net sales 795.0 Cost of goods sold 660.0 Gross profit 135.0 Selling expenses 73.5 EBITDA 61.5 Depreciation expenses 12.0 Earnings before interest and taxes (EBIT) 49.5 Interest expenses 4.5 Earnings before taxes (EBT) 45.0 Taxes (40%) 18.0 Net income 27.0 a. Calculate the ratios you think would be useful in this analysis. b. Construct a DuPont equation, and compare the companys ratios to the industry average ratios. c. Do the balance-sheet accounts or the income statement figures seem to be primarily responsible for the low profits? d. Which specific accounts seem to be most out of line relative to other firms in the industry? e. If the firm had a pronounced seasonal sales pattern or if it grew rapidly during the year, how might that affect the validity of your ratio analysis? How might you correct for such potential problems?
Fisafolia Corporation has gross income from operations of $210,000 and operating expenses of $160,000 for 2019. The corporation also has $30,000 in dividends from publicly traded domestic corporations in which the ownership percentage was 45 percent. Calculate the corporation's dividends received deduction for 2019. $_____________ Assume that instead of $210,000, Fisafolia Corporation has gross income from operations of $135,000. Calculate the corporation's dividends received deduction for 2019. $___________ Assume that instead of $210,000, Fisafolia Corporation has gross income from operations of $158,000. Calculate the corporation's dividends received deduction for 2019. $_____________
Profitability metrics The following selected data were taken from the financial statements of The O'Malley Group Inc. for December 31, 20Y5. 20Y4. and 20Y3: No dividends on common stock were declared between 20Y3 and 20Y5. a.Determine the return on total assets, the return on stockholders' equity, and the return on common stockholders' equity Tor the years 20Y4 and 20Y5. Round to one decimal place. b. What conclusions can be drawn from these data as to the company's profitability?
Profitability ratios The following selected data were taken from the financial statements of Robinson Inc. for December 31, 2016, 2015 and 2014: December31 2016 2015 2014 Total assets......................................... 4,800,000 4,400,000 4,000,000 Notes payable (8% interest)........................... 2,250,000 2,250,000 2,250,000 Common stock...................................... 250,000 250,000 250,000 Preferred 4% stock, 100 par (no change during year)........................... 500,000 500,000 500,000 Retained earnings................................... 1,574,000 1,222,000 750,000 The 2016 net income was 372,000, and the 2015 net income was 492,000. No dividends on common stock were declared between 2014 and 2016. a. Determine the rate earned on total assets, the rate earned on stockholders equity, and the rate earned on common Stockholders equity for the years 2015 and 2016. Round to one decimal place. b. What conclusions can be drawn from these data as to the companys profitability?
A Preparation of Ratios Refer to the financial statements for Burch Industries in Problem 12-89A and the following data. Required: 1. Prepare all the financial ratios for Burch for 2019 and 2018 (using percentage terms where appropriate and rounding all answers to two decimal places). 2. CONCEPTUAL CONNECTION Explain whether Burchs short-term liquidity is adequate. 3. CONCEPTUAL CONNECTION Discuss whether Burch uses its assets efficiently. 4. CONCEPTUAL CONNECTION Determine whether Burch is profitable. 5. CONCEPTUAL CONNECTION Discuss whether long-term creditors should regard Burch as a high-risk or a low-risk firm. 6. Perform a Dupont analysis (rounding to two decimal places) for 2018 and 2019.
Compute and Interpret Ratios Selected balance sheet and income statement information from Illinois Tool Works follows. $ millions 2019 2018 2017 Net operating profit after tax (NOPAT) $2,610 $2,711 Net income 2,521 2,563 Total assets 15,068 14,870 $16,780 Equity 3,026 3,254 3,254 Net operating profit after tax (NOA) 8,869 9,462 10,089 Treasury stock 18,982 17,545 15,562 a. Compute profitability measures: RNOA, ROA and ROE for 2019 and 2018 using the numbers as reported by the company. Note: Round answers to one decimal place (ex: 0.2345 = 23.5%). Metric 2019 2018 RNOA Answer Answer ROA Answer Answer ROE Answer Answer b. Adjust equity and total assets for the amount of treasury stock. $ millions 2019 2018 2017 Assets, restated Answer Answer Answer Equity, restated Answer Answer Answer
Compute and Interpret Ratios Selected balance sheet and income statement information from Illinois Tool Works follows. $ millions 2019 2018 2017 Net operating profit after tax (NOPAT) $2,610 $2,711 Net income 2,521 2,563 Total assets 15,068 14,870 $16,780 Equity 3,026 3,254 3,254 Net operating profit after tax (NOA) 8,869 9,462 10,089 Treasury stock 18,982 17,545 15,562 a. Compute profitability measures: RNOA, ROA and ROE for 2019 and 2018 using the numbers as reported by the company. Note: Round answers to one decimal place (ex: 0.2345 = 23.5%). Metric 2019 2018 RNOA Answer Answer ROA Answer Answer ROE Answer Answer b. Adjust equity and total assets for the amount of treasury stock. $ millions 2019 2018 2017 Assets, restated Answer Answer Answer Equity, restated Answer Answer Answer Using these restated numbers, recompute RNOA, ROA and ROE for both years.Note: Round answers to one decimal…
Compute and Interpret Ratios Selected balance sheet and income statement information from Illinois Tool Works follows. $ millions 2019 2018 2017 Net operating profit after tax (NOPAT) $2,897 $3,009 Net income 2,798 2,845 Total assets 15,671 15,465 $17,451 Equity 3,147 3,384 3,384 Net operating profit after tax (NOA) 9,224 9,840 10,493 Treasury stock 21,070 19,475 17,274 a. Compute profitability measures: RNOA, ROA and ROE for 2019 and 2018 using the numbers as reported by the company.Note: Round answers to one decimal place (ex: 0.2345 = 23.5%). Metric 2019 2018 RNOA Answer Answer ROA Answer Answer ROE Answer Answer b. Adjust equity and total assets for the amount of treasury stock. $ millions 2019 2018 2017 Assets, restated Answer Answer Answer Equity, restated Answer Answer Answer Using these restated numbers, recompute RNOA, ROA and ROE for both years.Note: Round answers to one decimal…
Compute and Interpret Ratios Selected balance sheet and income statement information from Illinois Tool Works follows. $ millions 2019 2018 2017 Net operating profit after tax (NOPAT) $2,897 $3,009 Net income 2,798 2,845 Total assets 15,671 15,465 $17,451 Equity 3,147 3,384 3,384 Net operating profit after tax (NOA) 9,224 9,840 10,493 Treasury stock 21,070 19,475 17,274 Using these restated numbers, recompute RNOA, ROA and ROE for both years.Note: Round answers to one decimal place (ex: 0.2345 = 23.5%). Metric 2019 2018 RNOA Answer Answer ROA Answer Answer ROE Answer Answer
Compute and Interpret Ratios Selected balance sheet and income statement information from Illinois Tool Works follows. $ millions 2019 2018 2017 Net operating profit after tax (NOPAT) $2,897 $3,009 Net income 2,798 2,845 Total assets 15,671 15,465 $17,451 Equity 3,147 3,384 3,384 Net operating profit after tax (NOA) 9,224 9,840 10,493 Treasury stock 21,070 19,475 17,274 b. Adjust equity and total assets for the amount of treasury stock. $ millions 2019 2018 2017 Assets, restated Answer Answer Answer Equity, restated Answer Answer Answer
Compute and Interpret Ratios Selected balance sheet and income statement information from Illinois Tool Works follows. $ millions 2019 2018 2017 Net operating profit after tax (NOPAT) $2,349 $2,440 Net income 2,269 2,307 Total assets 14,315 14,127 $15,941 Equity 2,875 3,091 3,091 Net operating profit after tax (NOA) 8,426 8,989 9,585 Treasury stock 17,084 15,791 14,006 a. Compute profitability measures: RNOA, ROA and ROE for 2019 and 2018 using the numbers as reported by the company. Note: Round answers to one decimal place (ex: 0.2345 = 23.5%). Metric 2019 2018 RNOA Answer Answer ROA Answer Answer ROE Answer Answer b. Adjust equity and total assets for the amount of treasury stock. $ millions 2019 2018 2017 Assets, restated Answer Answer Answer Equity, restated Answer Answer Answer Using these restated numbers, recompute RNOA, ROA and ROE for both years.Note: Round answers to one decimal…

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