Assume the following data for Cable Corporation and Multi-Media Inc. a-1. Comput
ID: 2816971 • Letter: A
Question
Assume the following data for Cable Corporation and Multi-Media Inc.
a-1. Compute return on stockholders’ equity for both firms. (Input your answers as a percent rounded to 2 decimal places.)
a-2. Which firm has the higher return?
b. Compute the following additional ratios for both firms. (Input your Net income/Sales, Net income/Total assets and Debt/Total asset answers as a percent rounded to 2 decimal places. Round your Sales/Total assets answers to 2 decimal places.)
Corporation Multi-Media Inc. Net income $ 32,400 $ 127,000 Sales 377,000 2,830,000 Total assets 408,000 925,000 Total debt 195,000 547,000 Stockholders' equity 213,000 378,000
Explanation / Answer
a-1.
Return on stockholder’s equity = Net income / Shareholder’s equity
Return on Stockholder's equity
Cable Corporation
15.21%
Multi-Media Inc.
33.60%
a-2.
Multi-Media Inc. has higher returns than Cable corporation
b.
Cable Corporation
Net income/Sales
8.59%
Net income/Total assets
7.94%
Sales/Total assets
0.92 times
Debt/Total assets
47.79%
Multi-Media Inc
Net income/Sales
4.49%
Net income/Total assets
13.73%
Sales/Total assets
3.06 times
Debt/Total assets
59.14%
Return on Stockholder's equity
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