Concept Introduction:
Return on total Assets:
The Return on total assets is profitability ratio that measures the percentage of profit earned on average assets invested in the business. Return on asset is calculated by dividing the net income by average total assets. The formula to calculate Return on assets is as follows:
Note: Average total assets are calculated as an average of beginning and ending total assets. The formula to calculate the average total assets is as follows:
Profit Margin Ratio:
Profit Margin Ratio is a profitability ratio that represents the percentage income earned on the sales. It is calculated by dividing the Net Income by the Sales. The formulas to calculate the Profit margin is as follows:
Requirement-1:
To Calculate:
The return on total assets of Apple and Google for the most recent two years

Answer to Problem 2AA
The returns on total assets of Apple and Google for the most recent two years are as follows:
Apple | ||||
Current Year | 1 Year Prior | Current Year | 1 Year Prior | |
Return on Total Assets | 13.9% | 14.9% | 6.9% | 12.4% |
Explanation of Solution
The returns on total assets of Apple and Google for the most recent two years are calculated as follows:
Apple | ||||
$ Millions | Current Year | 1 Year Prior | Current Year | 1 Year Prior |
Net Income (A) | $ 48,351 | $45,687 | $ 12,662 | $19,478 |
Beginning Total Assets (B) | $321,686 | $290,345 | $167,497 | $147,461 |
Ending Total Assets (C) | $375,319 | $321,686 | $197,295 | $167,497 |
Average Total Assets (D) = (B+C)/2 = | $348,503 | $306,016 | $182,396 | $157,479 |
Return on Total Assets =(A/D) = | 13.9% | 14.9% | 6.9% | 12.4% |
Concept Introduction:
Return on total Assets:
The Return on total assets is profitability ratio that measures the percentage of profit earned on average assets invested in the business. Return on asset is calculated by dividing the net income by average total assets. The formula to calculate Return on assets is as follows:
Note: Average total assets are calculated as an average of beginning and ending total assets. The formula to calculate the average total assets is as follows:
Profit Margin Ratio:
Profit Margin Ratio is a profitability ratio that represents the percentage income earned on the sales. It is calculated by dividing the Net Income by the Sales. The formulas to calculate the Profit margin is as follows:
Requirement-2:
To Identify:
The Company that has better return on total assets for the Current year

Answer to Problem 2AA
Apple has the higher return on total assets for the current year.
Explanation of Solution
The returns on total assets of Apple and Google for the most recent two years are as follows:
Apple | |||
Current Year | Current Year | ||
Return on Total Assets | 13.9% | 6.9% |
Hence, Apple has the higher return on total assets for the current year.
Concept Introduction:
Return on total Assets:
The Return on total assets is profitability ratio that measures the percentage of profit earned on average assets invested in the business. Return on asset is calculated by dividing the net income by average total assets. The formula to calculate Return on assets is as follows:
Note: Average total assets are calculated as an average of beginning and ending total assets. The formula to calculate the average total assets is as follows:
Profit Margin Ratio:
Profit Margin Ratio is a profitability ratio that represents the percentage income earned on the sales. It is calculated by dividing the Net Income by the Sales. The formulas to calculate the Profit margin is as follows:
Asset Turnover Ratio:
Asset Turnover Ratio is an efficiency ratio that represents the sales earned on the average assets invested in the business. It is calculated by dividing the Sales by Average total assets. The formulas to calculate the Asset Turnover Ratio is as follows:
Requirement-3:
To Calculate:
The Profit margin and Asset turnover for Apple and Google for the most recent two years

Answer to Problem 2AA
The Profit margin and Asset turnover for Apple and Google for the most recent two years are as follows:
Apple | ||||
Current Year | 1 Year Prior | Current Year | 1 Year Prior | |
Profit Margin | 21.1% | 21.2% | 11.4% | 21.6% |
Asset Turnover Ratio | 0.6578 | 0.7047 | 0.6078 | 0.5732 |
Explanation of Solution
The Profit margin and Asset turnover for Apple and Google for the most recent two years are calculated as follows:
Apple | ||||
Current Year | 1 Year Prior | Current Year | 1 Year Prior | |
Net Income (A) | $ 48,351 | $45,687 | $ 12,662 | $19,478 |
Net Sales (B) | $229,234 | $215,639 | $110,855 | $90,272 |
Profit Margin (C) = A/B = | 21.1% | 21.2% | 11.4% | 21.6% |
Beginning Total Assets (D) | $321,686 | $290,345 | $167,497 | $147,461 |
Ending Total Assets (E) | $375,319 | $321,686 | $197,295 | $167,497 |
Average Total Assets (F) = (D+E) /2 = | $348,503 | $306,016 | $182,396 | $157,479 |
Asset Turnover Ratio (G) = B/F= | 0.6578 | 0.7047 | 0.6078 | 0.5732 |
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Chapter 15 Solutions
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