Company Y:Asset Acquisition Strategy: Purchased assets in recent years at higher prices.Historical Cost Accounting: Records assets at historical cost.Debt Levels: Identical to Company X.Return on Assets Ratio: Identical to Company X.Question: The return on assets ratio is most likely:A. overstated for Company Y.B. overstated for both companies.C. overstated for Company X.D. accurate for both companies. Background: Two companies, X and Y, share identical return on assets ratios. However, theirasset acquisition strategies and the timing of purchases differ significantly. Company Xacquired most of its assets many years ago when prices were relatively low, while Company Ymade its acquisitions in recent years when prices were comparatively high. Both companiesmaintain identical debt levels and record their assets at historical cost.Company X:Asset Acquisition Strategy: Purchased assets many years ago at lower prices.Historical Cost Accounting: Records assets at historical cost.Debt Levels: Identical to Company Y.Return on Assets Ratio: Identical to Company Y.

Lets understand the basics.Return on asset ratio indicates that how much net income is generated…

Return on Assets Ratio: Identical to Company X. Question: The return on assets ratio is most likely: A. overstated for Company Y. B. overstated for both companies. C. overstated for Company X. D. accurate for both companies.

Return on Assets Ratio: Identical to Company X. Question: The return on assets ratio is most likely: A. overstated for Company Y. B. overstated for both companies. C. overstated for Company X. D. accurate for both companies.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

An accrual of wages expense would have what effect on the balance sheet? Select one: O O O O A. Decrease liabilities and increase equity B. Increase assets and increase liabilities C. Increase liabilities and decrease equity D. Decrease assets and decrease liabilities E. None of the above
1. Which of the following is referred to as the Accounting Equation? Assets Liabilities + Equity Equity Liabilities + Assets Liabilities Assets + Equity Assets = Liabilities - Equity = 2. Which of the following make up the Finance Equation? (select all that apply) Revenues = Price x Volume Costs = Fixed + Variable Profit Revenues-Costs Income Sales - COGS
2- Which of the following ratios would be most useful in determining a company's ability to cover its'interest payments? A. ROA. B Fixed charge coverage. C. Total asset turnover.
_______ ratios are used to measure the speed in which various assets are converted into sales or cash. A Debt (aka Leverage) B Efficiency (aka working capital) C Profitability C Coverage
Which of the following are not part of the components ofthe DuPont system for measuring and evaluating businessperformance?a. Return on sales.b. Residual income.c. Return on investment.d. Capital turnover.e. Number of patents.
Other income is a. added to operating income. b. deducted from operating income. c. added to gross profit. d. deducted from sales.