EXERCISE 15-19 - EXERCISE 15-19 (2025 minutes) (a) Wilder...

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(a) Wilder Company is the more profitable in terms of rate of return on total assets. This may be shown as follows: Wilder Company $720,000 $4,200,000 = 17.14% Ingalls Company $648,000 $4,200,000 = 15.43% It should be noted that these returns are based on net income related to total assets, where the ending amount of total assets is considered representative. If the rate of return on total assets uses net income before interest but after taxes in the numerator, the rates of return on total assets are the same as shown below: Wilder Company $720,000 $4,200,000 = 17.14% $648,000 + $120,000 – $48,000 $720,000 Ingalls Company $4,200,000 = $4,200,000 = 17.14% EXERCISE 15-19 (Continued) (b) Ingalls Company is the more profitable in terms of return on stockholder’ equity. This may be shown as follows: Ingalls Company $648,000 $2,700,000 = 24% Wilder Company $720,000 $3,600,000 = 20% (Note to instructor: To explain why the difference in rate of return on assets
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EXERCISE 15-19 - EXERCISE 15-19 (2025 minutes) (a) Wilder...

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