1. Profitability analysis for two companies. The following data show four items from the financial statements of  two companies for a recent year (amounts in millions of US$):                                 

a. Compute the rate of return on assets for each company. Disaggregate the rate of return on assets into profit margin and total assets turnover components.

b. Compute the rate of return on equity for each  company.  Disaggregate  the  rate  of  return on equity into profit margin, total assets turnover, and financial leverage ratio components.

c. The two companies are a manufacturer of brand-name motorcycles and an operator of specialty retail coffee shops, primarily in rented facilities. Which of the companies cor- responds to A and B? What clues did you use in reaching your conclusions?

2. Analyzing accounts receivable for two companies. The annual reports of Delta, Inc. and SunnyDay Company, two manufacturers of computers, reveal the information below for  the current year (amounts in millions). Delta sells custom-order personal computers, primarily to individuals. SunnyDay sells higher-end computers and Internet software, primarily to businesses.

a. Compute the accounts receivable turnover for each company.

b. Compute the average number of days that accounts receivable are outstanding for each company.

c. Why do the accounts receivable turnovers of  these two companies  differ?

3. Analyzing inventories over three years. The following information relates to the activities of Funtime, Inc., a manufacturer of  toys (amounts in millions of euros):

a. Compute the inventory turnover for each year.

b. Compute the average number of days that inventories are held each year.

c. Compute the cost of goods sold to sales percentage for each year.

d. How well has Funtime managed its inventories over the three years?