Solution to BTN chapter 1-7thEdition

Solution to BTN chapter 1-7thEdition - Reporting in Action...

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Reporting in Action — BTN 1-1 1. An organization’s total assets are equal to its total liabilities plus total equity. Because Apple’s liabilities and equity total $176,064 (in millions), this implies its amount of assets invested is the same $176,064 (in millions). 2. Return on assets is net income divided by the average total assets invested. For Apple this return is ($ millions): $41,733 / [($176,064 + $116,371)/2] = 0.285 or 28.5% . 3. We know that net income equals total revenues less total expenses. For Apple, we are told net income is $41,733 and revenues are $156,508. Thus, Apple’s total expenses are computed as: $156,508 - Expenses = $41,733. Total expenses must equal $114,775 . (all $ in millions) 4. Apple’s return on assets of 28.5% is good given that it exceeds its competitors’ return on assets of roughly 10% for this period. 5. Answer depends on the current annual report information obtained. Comparative Analysis — BTN 1-2 ($ millions) Apple Google 1. Total assets = Liabilities + Equity $176,064 $93,798 2. Return on assets $41,733 $10,737 [($176,064 + $116,371)/2] [($93,798 + $72,574)/2] 28.5% 12.9% 3. Revenues-Expenses = Net income $156,508- Expenses =$41,733 $50,175 - Expenses =$10,737
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