Bennett Company Operates a Large Tour Company in Atlantic Canada

question 33

Essay

Bennett Company operates a large tour company in Atlantic Canada.Selected data from Bennett
Company for the year ended December 31, 2013, are presented below: $$\begin{array} { l r } \text { Total assets } & \$ 1,600,000 \\\text { Average total assets } & 1,750,000 \\\text { Average common shareholders' equity } & 280,000 \\\text { Net Sales } & 1,400,000 \\\text { Net earnings (including } \$ 70,000 \text { interest expense) } & 206,400 \\\text { Tax rate } & 35 \%\end{array}$$ Required:
A) Calculate the return on assets, by calculating its components, profit margin and asset turnover, for Bennett
Company for the year ended December 31, 2013.
B) Comment on the ratios you prepared in part A, assuming the following averages for the charter industry: $$\begin{array} { l l } \text { Profit margin } & 8 \% \\\text { Return on Assets } & 14 \% \\\text { Asset turnover } & 1.75 \text { times }\end{array}$$

• A) Calculate the return on assets, by calculating its components, profit margin and asset turnover, for Bennett
• Company for the year ended December 31, 2013.
• B) Comment on the ratios you prepared in part A, assuming the following averages for the charter industry: \[\begin{array} { l l }
• \text { Profit margin } & 8 \% \\
• \text { Return on Assets } & 14 \% \\
• \text { Asset turnover } & 1.75 \text { times }
• \end{array}\]

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Definitions:

Non-Current Liability

Long-term financial obligations listed on a company's balance sheet, not due within one year.

Deferred Revenue

Income received by a company for goods or services yet to be delivered or performed.

Mortgages Payable

Long-term liabilities representing money a company owes on property mortgages that are due beyond the next year.

Periodic Instalment

Periodic installment refers to a regular, scheduled payment made over time towards settling a debt, which may include portions of both principal and interest.