Po-Yen Devices Inc. and Kejia Computer Ltd. are competing businesses. Selected d

Question

Po-Yen Devices Inc. and Kejia Computer Ltd. are competing businesses. Selected data from the financial statements for the two companies for the year ended 31 December 20X2 are shown below.

Required:
1. Compute the following ratios for both companies (for convenience, use 20X2 year-end balance sheet amounts instead of averages):

Operating Margin

Return on assets

Return on share equity

total debt-to-sharholders equity

Year ended 31 December 20X2 (in thousands of Canadian dollars) Po-Yen Devices Kejia Computer   Sales revenue $ 511,000 $ 267,000   Earnings from continuing operations, net of income tax 75,700 22,700   Net earnings, after income taxes 62,400 22,700   Comprehensive income 68,000 15,800   Current assets $ 245,600 $ 108,600   Tangible capital assets, net 377,800 39,600   Total assets $ 623,400 $ 148,200   Current liabilities $ 113,300 $ 59,200   Long-term liabilities 339,900 —      Common shares 100,000 50,000   Retained earnings 70,200 39,000   Total liabilities and shareholders’ equity $ 623,400 $ 148,200 Number of common shares outstanding (thousands) 300,000 250,000

Explanation / Answer

Operating income is often called as EBIT i.e., earnings before interest and taxes

operating margin is EBIT/total turnover

=75700/511000 = 14.81%

Return on assets

ROA = Net Income / Total Assets

  62,400/623,400 = 10%

Return on share equity

Return on Equity = Net Income/Shareholder's Equity

=62400/170200 = 36.66%

Debt to equity share holders

Debt/Equity Ratio = Total Liabilities / Shareholders' Equity

453200/170200 = 2.66%

in the same way u can calculate for another company

i dont have time that is why i did not calculated

calculate in the same way,there will be no change in that

thanking you

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