Total asset turnover, net profit, equity multiplier and return on equity .

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Answer 1

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Chapter 3, Problem 5P

a)

Summary Introduction

To determine: Total asset turnover, net profit, equity multiplier and return on equity.

b)

Summary Introduction

To Identify: Poorer performing firm and discuss the corrective actions taken by person X to control and discuss the additional data required by person X on hand when conducting his analyses.

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Using the data in the following table for a number of firms in the same industry, dothe following:•a. Compute the total asset turnover, the net profit margin, the equity multiplier, andthe return on equity for each firm.b. Evaluate each firm’s performance by comparing the firms with one another.Which firm or firms appear to be having problems? What corrective actionwould you suggest the poorer performing firms take? Finally, what additional data would you want to have on hand when conducting youranalyses?Firm (in million Dollars A B C D Sales $20 $10 $15 $25 Net Income after sales 3 0.5 2.25 3 Total Assets 15 7.5 15 24 Stockholders’ Equity 10 5 14 10

You need to analyze a firm's performance in relation to its peers. You can do this either by comparing the firms' balance sheets and income statements, or by comparing the firms' ratios. If you only had time to use one means of comparison which method would you use and why?

Financial analysts have developed two performance measures: Market Value Added (MVA) and Economic Value Added (EVA). Discuss and explain both. Which is a better representative of the firm’s performance, and why?

Answer 2

Question

Chapter 3, Problem 5P

a)

Summary Introduction

To determine: Total asset turnover, net profit, equity multiplier and return on equity.

b)

Summary Introduction

To Identify: Poorer performing firm and discuss the corrective actions taken by person X to control and discuss the additional data required by person X on hand when conducting his analyses.

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Answer 3

Question

Chapter 3, Problem 5P

a)

Summary Introduction

To determine: Total asset turnover, net profit, equity multiplier and return on equity.

b)

Summary Introduction

To Identify: Poorer performing firm and discuss the corrective actions taken by person X to control and discuss the additional data required by person X on hand when conducting his analyses.

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Answer 4

Question

Chapter 3, Problem 5P

a)

Summary Introduction

To determine: Total asset turnover, net profit, equity multiplier and return on equity.

b)

Summary Introduction

To Identify: Poorer performing firm and discuss the corrective actions taken by person X to control and discuss the additional data required by person X on hand when conducting his analyses.

Expert Solution & Answer

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Answer 5

Chapter 3, Problem 5P

a)

Summary Introduction

To determine: Total asset turnover, net profit, equity multiplier and return on equity.

b)

Summary Introduction

To Identify: Poorer performing firm and discuss the corrective actions taken by person X to control and discuss the additional data required by person X on hand when conducting his analyses.

Answer 6

Chapter 3, Problem 5P

a)

Summary Introduction

To determine: Total asset turnover, net profit, equity multiplier and return on equity.

Answer 7

Chapter 3, Problem 5P

a)

Summary Introduction

To determine: Total asset turnover, net profit, equity multiplier and return on equity.

Answer 8

b)

Summary Introduction

To Identify: Poorer performing firm and discuss the corrective actions taken by person X to control and discuss the additional data required by person X on hand when conducting his analyses.

Answer 9

b)

Summary Introduction

To Identify: Poorer performing firm and discuss the corrective actions taken by person X to control and discuss the additional data required by person X on hand when conducting his analyses.

Answer 10

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Answer 11

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Answer 12

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Answer 13

Ch. 3 - Prob. 1QTD Ch. 3 - Prob. 2QTD Ch. 3 - Prob. 3QTD Ch. 3 - Prob. 4QTD Ch. 3 - Prob. 5QTD Ch. 3 - Prob. 6QTD Ch. 3 - Prob. 7QTD Ch. 3 - Prob. 8QTD Ch. 3 - Prob. 9QTD Ch. 3 - Prob. 10QTD

Total asset turnover, net profit, equity multiplier and return on equity .

Solution Summary: The author explains how firms A and D have the highest return on equity at 30%, while firm D (with same ROE) has lower profit margin and lower turnover.

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To determine: Total asset turnover, net profit, equity multiplier and return on equity.

To Identify: Poorer performing firm and discuss the corrective actions taken by person X to control and discuss the additional data required by person X on hand when conducting his analyses.

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Chapter 3 Solutions