Choices for all: Hewlett-Packard and IBM are close competitors in the sale of co

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Choices for all:

Hewlett-Packard and IBM are close competitors in the sale of computer products and technology consulting. Selected financial data for Hewlett-Packard and 1BM are as follows: (Enter your answers in millions rounded to 1 decimal place.) Hewlett- Packard IBM (S in millions) Net seles Net income Operating cash flows Total assets, beginning Total assets, ending S 163,245 130,916 19,590 13,539 20,281 233,400 73,452 134,278 144,433 9,795 Required: 1. Calculate the return on assets for both companies. (S in millions) Return on Assets Hewlett-Packard IBM 2. Caiculste the cash return on assets for both companies. in Cash Return on Assets Hewlett-Packard IBM

Explanation / Answer

1. Return on asset= Net Profit/ Average assets Average asset of Hewlett Packard= 233400+134278/2 183839 Average asse of IBM= 173452+144433/2 158943 Return on asset Hewlett Packard= 9795/183839 0.053 Return on aset IBM= 19590/158943 0.12325 2. Calculation of cash return on assets Cash return on asset= cash flow/ total asset Hewlett = 13539/233400=.058 IBM= 20281/173452 0.1169 3.Cash flow to sales= cash flow /sale Hewlett= 13539/163245=.08294 IBM= 20281/130916=.1549

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