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283
P9–4
284
P9–4, Concluded
285
P9–5
1. a.
20%
25%
Return on Total Assets = AssetsTotal Average
ExpenseInterest +IncomeNet
286
P9–5, Continued
1. b.
Return on Stockholders’ Equity = Equity rs'Stockholde Total Average
IncomeNet
287
P9–5, Continued
1. c.
6.0
7.0
8.0
Times Interest
Earned = Expense Interest
Expense Interest+ExpenseTax Income+Income Net
288
P9–5, Concluded
2. The return on total assets and the return on stockholders’ equity are above
289
CASES
Case 9–1
This position does not allow the shareholders to take advantage of leverage. As a
result, the return on shareholders’ equity cannot be improved by using debt. In
Case 9–2
Kim is concerned about the inventory and accounts receivable levels because
she must determine their value. Inventory that cannot be sold (or must be sold at
290
Case 9–3
APPLE AND BEST BUY
Common-Sized Statements
Apple Best Buy
Sales ........................................................... 100.0% 100.0%
The common-sized analysis indicates Apple and Best Buy are very different
The gross profit for Apple was 40.1% of sales. In contrast, Best Buy had a gross
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