culver corporation and kiltie corporation two corporations of roughly the same size 534582
Culver Corporation and Kiltie Corporation, two corporations of roughly the same size, are both involved in the manufacture of umbrellas. Each company depreciates its plant assets using the straight-line approach. An investigation of their financial statements reveals the following information.
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culver corporation and kiltie corporation two corporations of roughly the same size 534582
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Kiltie Corp. |
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Net income |
$ 780,000 |
$ 900,000 |
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Sales |
2,400,000 |
2,500,000 |
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Total assets (average) |
3,000,000 |
2,700,000 |
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Plant assets (average) |
1,400,000 |
1,200,000 |
|
Intangible assets (goodwill) |
480,000 |
0 |
Instructions
(a) For each company, calculate these values:
(1) Return on assets ratio.
(2) Profit margin.
(3) Asset turnover ratio.
(b) Based on your calculations in part (a), comment on the relative effectiveness of the two companies in using their assets to generate sales. What factors complicate your ability to compare the two companies?
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