Problem 9-7A Riverbed Corporation and Martinez Corporation, two companies of rou

Question

Problem 9-7A Riverbed Corporation and Martinez 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 information shown below Net income Sales revenue Total assets (average) Plant assets (average) Intangible assets (goodwill) Riverbed Corp. $ 245,500 1,301,000 3,989,000 268,000 431,100 Martinez Corp $ 349,500 1,360,000 3,696,000 1,819,000 For each company, calculate these values: (Round answers to 2 decimal places, e.g. 6.25% or 17.54.) Riverbed Corp Martinez Corp (1) Return on assets (2) Profit margin (3) Asset turnover times times

Explanation / Answer

Riverbed crop Martinez corp Return on Asset = Net income/ Average total asset Return on Asset 6.15 9.46 (245500/3989000) (349500/3696000) Profit margin = Net income/ net sales Profit margin 18.87 25.70 (245500/1301000) (349500/1360000) Asset turnover = Net sales/Average total asset 0.33 0.37 (1301000/3989000) (1360000/3696000)

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