Question

Following are financial data for Syke and Under Shield. Syke Under Shield $ millions Current Year 1 Year prior Current Year 1 Year prior Net income $ 3,192 $ 3,175 $ 649 $ 1,164 Net sales 27,805 30,056 12,748 20,556 Total assets 18,764 21,512 10,252 15,659 1. Compute the return on total assets for the current year for (a) Syke and (b) Under Shield. 2. Which company more efficiently used its assets in the current year

Answer 1

Answer:

For Skye - 15.85%

For under shield - 5%

Skye is using its asset more efficiently because its ROA is higher

Explanation:

Return on total assets =  Net income / Average total assets

For Skye

$3192 /  [(18,764 + 21,512)/2] = 0.1585 = 15.85%

For under shield

$ 649 / [(10,252 + 15,659)/ 2] = 0.05 = 5%

Skye is using its asset more efficiently because its ROA is higher