Ratio Analysis: Consolidated Financial Statements $\$$ Million -Based on the Above Preceding Table,what Are the Returns on

question 11

Multiple Choice

Ratio Analysis: Consolidated Financial Statements
$\$$ million
$\begin{array}{lrrr} & \text { Company A } & \text { Company B } & \text { Company C } \\\hline \text { Income statement } & & & 150 \\\text { Operating profit } & 120 & 100 & (20) \\\text { Interest } & 0 & 0 & 130 \\\text { Earnings before taxes } & 120 & 100 & (33) \\\text { Taxes } & (30) & (25) & (33) \\\text { net income }&90&75&98\\ \text {Operating tax rate }&25.0 \% & 25.0 \% & 25.0 \%\\ \text { Balance sheet}\\\text { Inventory } & 125 & 100 & 150 \\\text { Property, plant, and equipment } & 400 & 400 & 365\\\text { Equity investments } & 0 & 50 & 0 \\\text { Total assets } & 525 & 550 & 515\\\text { Accounts payable } & 50 & 50 & 50 \\\text { Debt } & 0 & 0 & 190\\\text { Equity } & 475 & 500 & 275 \\\text { Liabilities and equity } & 525 & 550 & 515\\\end{array}$
-Based on the above preceding table,what are the returns on assets (ROAs ) for Companiesy A,B,and C,respectively?

• A)17 percent,14 percent,19 percent.
• B)15 percent,14 percent,18 percent.
• C)11 percent,10 percent,20 percent.
• D)16 percent,13 percent,18 percent.

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Definitions:

Dividends Declared

A company's announcement of a forthcoming dividend payment to its shareholders.

Earnings Per Share

A financial metric indicating the portion of a company's profit allocated to each outstanding share of common stock, serving as an indicator of a company's profitability.

Net Income

The final profit figure for a company after subtracting all operational expenses, taxes, and costs from the gross revenue.

Cumulative Preferred Stock

A type of preferred stock where dividends accrue if not paid in a given year and must be paid out before any dividends can be distributed to common stockholders.