Use the Information That Follows Taken from Campbell Company's Financial

question 30

Multiple Choice

Use the information that follows taken from Campbell Company's financial statements for the years ending December 31, 2017 and 2016.
$\begin{array}{lrr}\text { Balance Sheet Information }&2017&2016\\\hline \text { Assets}\\\text { Cash } & \$ 25 & \$ 50 \\\text { Accounts receivable } & 60 & 70 \\\text { Inventory } & 40 & 30 \\\text { Land, building, and equipment } & \underline{225} & \underline{250} \\\text { Total Assets } & \$ \underline{350} & \$ \underline{400} \\\end{array}$

$\begin{array}{l}\text { Liabilities and Shareholders' Equity }\\\hline \text { Accounts payable } & \$ 85 & \$ 100 \\\text { Long term note payable } & 180 & 200 \\\text { Common stock } & 150 & 150 \\\text { Retained earnings } & \underline{(65) } &\underline{ (50) } \\\text { Total Liabilities \& Shareholders' Equity }& \underline{\$ 350 }& \underline{\$ 400 }\\\end{array}$

$\begin{array}{lr}\text { Income Statement Information }\\\text { Sales (all sales are on credit) } & \$ 850 \\\text { Cost of goods sold } & \underline{425} \\\text { Gross profit } & {425}\\\text { Operating expenses } & \underline{ 440} \\\text { Net income } &\$(15) \end{array}$
Calculate Campbell's return on equity and return on assets for the year ended December 31, 2017. Assume that the income tax rate is 30%. Also assume that in Campbell's industry, the industry average return on equity is 19% and the average return on assets is 11%.

• A)Campbell's return on equity and return on assets are better than average for Campbell's industry.
• B)Campbell's return on equity and return on assets are worse than average for Campbell's industry.
• C)Campbell's return on equity is better but return on assets is worse than average for Campbell's industry.
• D)Campbell's return on equity is worse but return on assets is better than average for Campbell's industry.

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Definitions:

Grapevine Network

Grapevine network signifies informal and unofficial channels of communication within an organization, often spreading rumors or unofficial information.

Formal Groups

Organized groups with defined structures and roles, typically formed within institutions or businesses for specific purposes.

Formalizing

The process of establishing official procedures or systems, often within organizational or legal contexts.

Group Development

A process by which a group of individuals with a common purpose evolves into a cohesive unit with defined roles and norms.