1.
Introduction: The
To calculate: The total amount of assets invested in (a) Apple and (b) google company.
1.

Explanation of Solution
(a)
Liability plus equity: $231,839
The total amount of assets invested is calculated as follows:
Therefore, the total amount of assets invested is $231,839.
(b)
Liability plus equity: $131,133
The total amount of assets invested is calculated as follows:
Therefore, the total amount of assets invested is $131,133.
2.
Introduction: The return on asset ratio is measured to check the efficiency of the company in using its assets in earning profits for the company. It is calculated by dividing the net income of the company by the total average assets of the company.
To calculate:The return on assets for (a) Apple and (b) google.
2.

Explanation of Solution
(a)
Net income: $39,510
Beginning assets: $207,000
Ending assets: $231,839
Average assets are calculated as follows:
Return on assets is calculated as follows:
Therefore, return on asset is 18.00%.
(b)
Net income: $14,444
Beginning assets: $110,920
Ending assets: $131,133
Average assets are calculated as follows:
Return on assets is calculated as follows:
Therefore, return on asset is 11.9%.
The return on asset ratio of the company is 10.7% and the competitors have a return on asset ratio of 10%. It depicts that the company is more efficiently using its assets in generating profits for the company than its competitors. The company is more efficient than its competitors.
3.
Introduction: The income statement of a company is a financial statement which shows the amount of revenue, expenses and net profit earned by the company. The amount of expenses is calculated by deducting net income from the revenues of the company.
To calculate: The amount of expenses for (a) Apple and (b) google company.
3.

Explanation of Solution
(a)
Net income: $39,510
Revenues & sales: $182,795
Therefore, expenses are $143,285.
(b)
Net income: $14,444
Revenues & sales: $66,001
Therefore, expenses are $51,557.
4.
Introduction:The return on asset ratio is measured to check the efficiency of the company in using its assets in earning profits for the company. It is calculated by dividing the net income of the company by the total average assets of the company.
To discuss: Thereturn on asset ratio calculated for (a) Apple and (b) Google.
4.

Explanation of Solution
(a)
The return on asset for A company is 18.00%. In comparison to this, the average return on asset of competitors is 11%. This shows that the A company is much efficient in using its assets for earning profits for the company. This company earns higher profits than its competitors from using its assets.
(b)
The return on asset for G company is 11.9%. In comparison to this, the average return on asset of competitors is 11%. This shows that the A company is much efficient in using its assets for earning profits for the company. This company earns higher profits than its competitors from using its assets.
5.
Introduction: The balance sheet is the financial statement of the company which shows the amount of assets, liabilities & equity of the company. The income statement of a company is a financial statement which shows the amount of revenue, expenses and net profit earned by the company. These financial statements are used in assessing the financial standing of a company.
To conclude: About the A company and G company according to the calculations made.
5.

Explanation of Solution
A company:
According to the calculations made, the A company is a good performing company. It is profit earning company and the company is efficient in using its assets for earning the profits. The return on asset ratio of the company shows that a major part of profit is earned through the efficient use of company’s assets. This company has good investment opportunities.
G company:
According to the calculations made, the G company is an average performing company. The profits of the company are less, and the expenses are more. The return on asset ratio is equal to the competitor’s return on asset. This company does not have much advantage in investment purposes.
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Chapter 1 Solutions
FINANCIAL ACCT-CONNECT
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