Assets 8,370,000 8,380,000 3,140,000 question # 2. The Global Products Corporati
ID: 2464113 • Letter: A
Question
Assets 8,370,000 8,380,000 3,140,000
question # 2.
The Global Products Corporation has three subsidiaries. Medical Supplies Heavy Machinery Electronics
Sales $ 20,820,000 $ 5,720,000 $ 4,890,000
Net income (after taxes) 1,890,000 597,000 344,000
If the $8,380,000 investment in the heavy machinery division is sold off and redeployed in the medical supplies subsidiary at the same rate of return on assets currently achieved in the medical supplies division, what will be the new return on assets for the entire corporation? (Round your return on assets to 2 decimal places, return on redeployed assets to the nearest dollar amount and final answer to 2 decimal places. Omit the "%" sign in your response.)
d)If the $8,380,000 investment in the heavy machinery division is sold off and redeployed in the medical supplies subsidiary at the same rate of return on assets currently achieved in the medical supplies division, what will be the new return on assets for the entire corporation? (Round your return on assets to 2 decimal places, return on redeployed assets to the nearest dollar amount and final answer to 2 decimal places. Omit the "%" sign in your response.)
M Chapter 3-Graded Home f Liezto.mheducation.com/hm.tpx :: Apps M Watch movies online YouTube G Google Google Translate -Electronics, Cars, Fash Bank PCCC News 3 NBA.com N Netflix eChegg com Other bookmarks Given the financial statements for Jones Corporation and Smith Corporation: JONES CORPORATION Current Assets Liabilities Cash Accounts receivable Inventory $188,000 80,400 $ 25,800 Accounts payable Bonds payable (long term) 88,700 54,200 Long-Term Assets Stockholders' Equity 578,000 Common stock (153,900) Paid-in capital 424, 100 Retained earnings Fixed assets Less: Accumulated depreciation Net fixed assets* $150,000 70,000 104,400 Total assets $ 592,800 Total liabilities and equity $ 592,800 Sales (on credit) Cost of goods sold $ 1,717,000 782,000 Gross profit 935,000 283,000 53,300 Selling and administrative expense Less: Depreciation expense Operating profit Interest expense 598,700 10,000 Earnings before taxes Tax expense 588,700 93,200 Net income $ 495,500 Use net fixed assets in computing fixed asset turnover TIncludes $11,100 in lease payments SMITH CORPORATION Current Assets Liabilities $ 36,100 Accounts pavable I'm Cortana. Ask me anything 10:04 AM 4/9/2016Explanation / Answer
(a-1)
1. Profit margin = Net profit / Sales
Jones: 495500 / 1717000 = 28.86%
Smith: 79700 / 1540000 = 5.18%
2. ROA = Net income / Total assets
Jones: 495500 / 592800 = 83.59%
Smith: 79700 / 518800 = 15.36%
3. ROE = Net income / Shareholder equity
Jones: 495500 / (150000 + 70000 + 104400) = 152.74%
Smith: 79700 / (75000 + 30000 + 78100) = 43.53%
4. Receivable turnover = Sales / Receivables
Jones: 1717000 / 88700 = 19.36
Smith: 1540000 / 77300 = 19.92
5. Average collection period: 360 / Receivables turnover
Jones: 360 / 19.36 = 18.6
Smith: 360 / 19.92 = 18.07
6. Inventory turnover = COGS / Inventory
Jones: 782000 / 54200 = 14.43
Smith: 1110000 / 75300 = 14.74
7. Fixed asset turnover = Sales / Fixed asset
Jones: 1717000 / 424100 = 4.05
Smith: 1540000 / 319300 = 4.82
8. Total asset turnover = Sales / Total asset
Jones: 1717000 / 592800 = 2.90
Smith: 1540000 / 518800 = 2.97
9. Current ratio = Current asset / Current liabilities
Jones: (25800 + 88700 + 54200) / (188000) = 0.90
Smith: (36100 + 10800 + 77300 + 75300) / (84700) = 2.36
10. Quick ratio = (Current asset - Inventories) / Current liabilities
Jones: (25800 + 88700) / (188000) = 0.61
Smith: (36100 + 10800 + 77300) / (84700) = 1.47
11. Debt-to-Asset = Long-term liabilties / Total asset
Jones: 80400 / 592800 = 13.56%
Smith: 251000 / 518800 = 48.38%
12. Times interest earned = Operating profit / Interest expense
Jones: 598700 / 10000 = 59.87
Smith: 149300 / 29500 = 5.06
13. Fixed charge coverage = (Operating profit + Depreciation + Interest) / (Depreciation + Interest)
Jones: (598700 + 53300 + 10000) / (53300 + 10000) = 10.46
Smith: (149300 + 51700 + 29500) / (51700 + 29500) = 2.84
NOTE: The first sub-question is very lengthy and requires too many computations, so only this sub-part is answered.