15 Performing ratio analysis using real-world data American Greetings Corporatio
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Question
15 Performing ratio analysis using real-world data
American Greetings Corporation manufactures and sells greeting cards and related items such as gift wrapping paper. CSX Corporation is one of the largest railway networks in the nation. The following data were taken from one of the companies’ December 28, 2012, annual report and from the other’s February 29, 2012, annual report. Revealing which data relate to which company was intentionally omitted. For one company, the dollar amounts are in thousands, while for the other they are in millions.
Calculate depreciation costs as a percentage of sales for each company. (Round your answers to 2 decimal places (i.e., 0.0123 to be considered as 1.23%.).)
DEPRECIATION BASED ON SALES
Company 1 ( %)
Company 2 ( %)
b Calculate property, plant, and equipment as a percentage of total assets for each company. (Round your answers to 2 decimal places (i.e., 0.0123 to be considered as 1.23%.).)
PERCENTAGE OF PLANT IN TOTAL ASSETS
Company 1 ( %)
Company 2 ( %)
Company 1 ( )
Company 2 ( )
American Greetings Corporation manufactures and sells greeting cards and related items such as gift wrapping paper. CSX Corporation is one of the largest railway networks in the nation. The following data were taken from one of the companies’ December 28, 2012, annual report and from the other’s February 29, 2012, annual report. Revealing which data relate to which company was intentionally omitted. For one company, the dollar amounts are in thousands, while for the other they are in millions.
Explanation / Answer
Depreciation based as a percentage of Sales of each company:
Company 1: 800/8640*100=9.26%
Company 2: 57320/1902400*100=3.01%
Percentage of Plant in Total Assets:
Company 1: 19930/24687*100=80.73%
Company 2: 339086/2535632*100=13.37%
Company 2 appears to be using its assets more effectively as it has lower depreciation costs as a percentage of its total sales, and also it has a lower level of total plant in its fixed assets, implying it may hold larger quantities of other assets like Stocks, Investments, Liquid Assets, etc
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