Problem 12-3 Consider the following information for Runner and Son: 12/31/2017 1

Question

Problem 12-3 Consider the following information for Runner and Son: 12/31/2017 12/31/2018 $55,186,000 $60,097,000 Noninterest-bearing current liabilities 1,041,8001,306,800 3,446,400 768,670 35% Total assets Net income Interest expense Tax rate 3,319,900 682,700 35% Evaluate the company in terms of ROI. (Round R01 to 2 decimal places, e.g. 15.32%.) 2017 2018 ROI LINK TO TEXT While income has increased in fiscal 2018, is it clear that the company's performance has improved? It is that the company's performance has improved

Explanation / Answer

It is not clear that the company's performance has improved as the ROI has reduced for 2018

ROI Net Income/Capital Employed 2017               2,018.00 Net Income                                                            3,319,900.00      3,446,400.00 Capital employed=Total Assets                                                          55,186,000.00    60,097,000.00 ROI 6.02% 5.73% Alternative Post Tax ROI Net Income+Interest/Capital Employed Net Income                                                            3,319,900.00      3,446,400.00 Interest                                                                682,700.00          768,670.00 Capital employed=Total Assets                                                            4,002,600.00      4,215,070.00 Investment                                                          55,186,000.00    60,097,000.00 ROI 7.25% 7.01%

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