Concept Introduction
Return on assets: Return on Assets (ROA) is an accounting ratio that describes how profitable a company is with respect to its total assets. ROA explains how efficiently the management has utilized the business assets for generating earnings. ROA is calculated by dividing a company’s annual income by the average assets of the company. ROA is described in percentage terms.
Debt Ratio: Debt ratio is a financial ratio that calculates the leverage of the company. It is the ratio of the total debt to the total assets and is represented in percentage terms. The debt ratio explains the amount of debt on the
1.a.
To Compute: The Debt ratio and the return on assets ratio for the data given.
To find: The Company, whose business relies most heavily on creditor financing.
To find: The Company, whose business relies most heavily on equity financing.
To find: Two Companies with greatest risk based on debt ratio.
To find: Two Companies which earn the highest return on assets.
To find: The Company that the investors would most likely prefer based on the risk–return relation.
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Chapter 2 Solutions
Loose Leaf for Fundamentals of Accounting Principles and Connect Access Card
- Hello tutor solve this question accountingarrow_forwardProvide correct answer is accountingarrow_forwardMilani, Incorporated, acquired 10 percent of Seida Corporation on January 1, 2023, for $190,000 and appropriately accounted for the investment using the fair-value method. On January 1, 2024, Milani purchased an additional 30 percent of Seida for $600,000 which resulted in significant influence over Seida. On that date, the fair value of Seida's common stock was $2,000,000 in total. Seida's January 1, 2024, book value equaled $1,850,000, although land was undervalued by $120,000. Any additional excess fair value over Seida's book value was attributable to a trademark with an eight-year remaining life. During 2024, Seida reported income of $300,000 and declared and paid dividends of $110,000. Required: Prepare the 2024 journal entries for Milani related to its investment in Seida. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. View transaction list Journal entry worksheetarrow_forward
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