selected financial statement data from texas telecom inc for years 5 and 9 are repro 536488
Selected financial statement data from Texas Telecom, Inc., for Years 5 and 9 are reproduced
below ($ millions):
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selected financial statement data from texas telecom inc for years 5 and 9 are repro 536488
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|
Year 5 |
Year 9 |
|
|
Income Statement Data |
||
|
Revenues |
$542 |
$979 |
|
Operating income |
35 |
68 |
|
Interest expense |
7 |
0 |
|
Pretax income |
28 |
68 |
|
Income taxes |
14 |
34 |
|
Net income |
14 |
34 |
|
Balance Sheet Data |
|
|
|
Long-term operating assets |
$ 52 |
$ 63 |
|
Working capital |
123 |
157 |
|
Total liabilities . |
50 |
0 |
|
Total shareholders” equity |
125 |
220 |
Required:
a. Calculate return on common equity and disaggregate ROCE for Years 5 and 9 using end-of-year values for computations requiring an average (assume fixed assets and working capital are operating and a 50% tax rate).
b. Comment on Texas Telecom”s use of financial leverage.
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