Reference no: EM13133554
Comparative financial statement data for Cool Brewery Company and Northern Beer Company, two competitors, follow:
Cool Brewery Company Northern Beer Company
Net Sales $206,700 $40,500
Cost of goods sold 100,500 15,300
Operating expenses 85,400 17,190
Interest expense 7,800 370
Income tax expense 4,700 1,130
Current assets 98,000 12,700
Long-term assets (net) 210,000 29,100
Current liabilities 71,900 3,900
Long-term liabilities 103,900 8,000
Share capital 51,200 17,800
Retained earnings 81,000 12,100
a) Calculate the return on assets.
For the ROA, break both of them down into their two component ratios and prove they equal the returns calculated above.
b) Identify two main reasons for the difference in their profitability
c) Calculate the return on equity for both companies using the calculation in its simplest form and prove your result using the Dupont entity calculation.
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