Compute for return on investments and return on assets

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Reference no: EM133944490

Problems of financial ratios.

1. Compute for return on investments.

Scenario:

The management of International Heal Medical Companyis evaluating the performance of itsthree (3)divisions. The Booboo Divisionhad operating profit of ?24,950and on average used asetswith a book value of ?311,900. The Splint Division had an operating profit of ?17,500 and used average assets of ?177,950. The Intensive Care Division had an operating profit of ?28,500 and average assets of ?475,000. The company is planning to award the Intensive Care Division relying on its high operating profit. Should the management continue with this decision? Justify your answer.

2. Compute for return on assets.

Scenario:

Charlie's Construction Company is a growing construction business that has a few contracts to build storefronts in Pasay. Charlie's balance sheet shows beginning assets of ?1,000,000 and an ending balance of ?2,000,000 of assets. During the current year, Charlie's company had a net income of ?20,000,000. Compute for the company's return on assets and interpret the results.

3. Compute for debt ratio.

Scenario:

Dave's Guitar Shop is thinkingabout building an addition onto the back of its existing buildingfor more storage. Dave consults with his banker about applying for a new loan. The bank asks for

Dave'sbalanceto examine his overall debt levels. The banker discovers that Dave has total assetof ?5,000,000 and total liabilities of ?25,000. Compute for Dave's debt ratio.

Reference no: EM133944490

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