Titus Corporation and Vane Corporation, two companies of roughly the same size,

Question

Titus Corporation and Vane Corporation, two companies of roughly the same size, are both involved in the manufacture of shoe-tracing devices. Each company depreciates its plant assets using the straight-line approach. An investigation of their financial statements reveals the following information.


Titus Corp. Vane Corp.
Net income $224,920 $335,190
Sales 1,425,220 1,829,580
Total assets (average) 3,968,860 3,314,820
Plant assets (average) 2,638,820 1,862,820
Intangible assets (goodwill) 340,140 0


Calculate: Return on assets ratio
Profit margin
Asset turnover ratio

Explanation / Answer

Return on assets ratio=NI/Average total assets=224,920/3,968,860=0.05667 =335,190/3,314,820=0.1011186 Profit margin on sales=NI/Net sales=224,920/1,425,220=0.1578 =335,190/1,829,580=0.1832 Asset turnover ratio=Net sales/Average total assets=1,425,220/3,968,860=0.3591 =1,829,580/3,314,820=0.5519

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