Chapter 14- Build Your Skills - The lower return on assets...

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Profit margin = net earnings = 680.7 = 10.8% Sales 6,295.4 Return on assets = net earnings = 680.7 = 16.1% Assets 4,237.1 Return on equity = net earnings = 680.7 = 39.7% Equity 1,713.4 Comparison of Western Grain Ratios with the Industry Western Grain Industry Difference profit margin 10.8% 12% -1.2% return on assets 16.1% 18% -1.9% return on equity 39.7% 25% 14.7% A comparison of the profitability ratios shows that Western Grain has a lower profit margin, which indicates that Western is not operating as efficiently as the average firm in the industry.
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Unformatted text preview: The lower return on assets indicates that Western does not generate as much profit per $1 of assets as the average firm in the industry. This could be due to inefficient asset utilization or because Western has high equipment costs compared to the industry. By comparing these ratios, Western should be able to determine areas for improvement in performance....
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This note was uploaded on 04/19/2011 for the course ECON 101 taught by Professor Dion during the Spring '11 term at Blue Ridge Community and Technical College.

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