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Assume the following data for Cable Corporation and Multi-Media Inc.Cable CorporationNet income $30,700Sales 361,000Total assets 423,000Total debt 199,000Stockholders' equity 224,000Multi-Media Inc.Net income $149,000Sales 2,390,000Total assets 994,000Total debt 506,000Stockholders' equity 488,000.a. Compute return on stockholders' equity for both firms. (Input your answers as a percent rounded to 2 decimal places.)a-2. Which firm has the higher return?b. Compute the following additional ratios for both firms. (Input your net income/Sales, Net income/Total assets and debt/Total asset answers as a percent rounded to 2 decimal places. round your sales/total assets answers to 2 decimal places.)

Sagot :

Vinodhiniss

Multi-media Inc. has got a higher return from the stockholder's equity.

How is the equity of both the firms calculated?

a ) Return on Stockholder's equity = NI / Total equity

1. Cable corporation = $30,700/$224,000

                                  = 13.71%

2. Multi-media Inc. = $149,000/$488,000

                               = 30.53%

Return on stockholders' equity for Cable corporation is 13.71%

Return on stockholders' equity for Multi-media Inc. is 30.53%

a- 2) Multi-media Inc. has got a higher return of the two firms.

b) Additional ratios for both firms

Cable corporation:

NI/Sales = $30,700/$361,000

              = 8.5%

NI/Total assets = $30,700/423,000

                         = 7.26%

Debt/Total assets = $199,000/$423,000

                              = 47.05%

Multi-media Inc. :

NI/Sales = $149,000/$2,390,000

              = 6.23%

NI/Total assets = $149,000/994,000

                         = 14.99%

Debt/Total assets = $506,000/$994,000

                              = 50.91%

What is equity?

  • Equity is the sum of money invested in or owned by a company's owner.
  • The difference between a firm's obligations and assets on its balance sheet indicates how much equity the company has.
  • The equity value is calculated using the share price or a value established by valuation specialists or investors.
  • Owners' equity, stockholders' equity, and shareholders' equity are further names for this account.
  • One of the most popular metrics used by analysts to assess the financial health of a company is equity.
  • The company's balance sheet is used to calculate the equity value.
  • It is the worth of the company's income less any debts that are not a part of the acquisition in this situation.

To learn more about equity, refer:

https://brainly.com/question/12781629

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