Key comparative figures ($ millions) for both Research In Motion and Apple follo
ID: 2389773 • Letter: K
Question
Key comparative figures ($ millions) for both Research In Motion and Apple follows.Key Figure Research In Motion Apple
Liabilities + Equity ………. $10,204 $47,501
Net Income ……………….. 2,457 8,235
Revenues and sales ……… 14,953 14,905
1. What is the total amount of assets invested in (a) Research In Motion and (b) Apple?
2. What is the return on assets for (a) Research In Motion and (b) Apple? Research In Motion’s beginning- year assets equal $8,101 (in millions) and Apple’s beginning- year assets equal $36,171 (in millions).
3. How much are expenses for (a) Research In Motion and (b) Apple?
4. Is return on assets satisfactory for (a) Research In Motion and (b) Apple? (Assume competitors average an 18% return.)
5. What can you conclude about Research In Motion and Apple from these computations?
Please show your work………
Explanation / Answer
1) The total amount of assets for Research in motion are $10,204 millions and the total amount of assets for Apple are $47,501 millions. Since we know from the basic accounting equation, Assets = Liabilities + Equity Therefore, the value of (Liabilities + Equity) is equal to the value of Assets for both the companies. 2) Computing the Return on Assets for both the Companies. For Research in Motion: Return on Assets = Net income / Avearage total assets But the value of Average total assets is calculated as Average total assets = (Beginning assets + Ending assets) /2 = ($8,101 + $10,204) / 2 = $9152.5 m ROA = $2,457 / $9,152.5 = 0.268 or 27% Therefore, ROA for Research in Motion is 27% For Apple: First calculating the value of Average total assets Average total assets = (Beginning assets + Ending assets) /2 = ($36,171 + $47,501) / 2 = $41,836 Substituting the values in ROA formula, we get ROA = $8,235 / $41,836 = 0.1968 or 20% Therefore, the ROA for Apple company is 20% 3) We know that Expenses are calculated as Sales revenue - Expenses = Net income Sales revenue - Net income = Expenses For Research in Motion: Expenses = $14,953 - $2,457 = $12,496 Therefore, the expenses for Reaserch in Motion are $12,496 For Apple: Expenses = $14,905 - $8,235 = $6,670 Therefore, the expenses for Apple are $6,670 4) If we compare the values of ROA with the competitors average 18% , both the companies are doing satisfactory of which Research in Motion is doing well compared with Apple as it is having the highest value of ROA. 5) Though, the ROA value for Research in Motion is 27% and for Apple it is 20%, but the expenses for Research in motion are contributing a high percentage of 84% of sales revenue and the expenses for Apple are contributing 45% of the sales revenue. This indicates that the Research in motion Company is not having control upon its expenditure which therefore resulted in less net income. Among the two companies, Apple is doing well and hence it is competetive.Related Questions
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