Information taken from the 2014 annual report of Aardvark Company follows. During 2014, the company had no non-operating or nonrecurring items included in income and had no outstanding preferred stock.

$ are in millions

2014: sales $19,903, interest expense $130, net income $1,153, total asset $12,673, dividends ($153), total stockholders equity $4,288, assumed ta rate 35%, industry ROA 7.32% and Industry operating profit margin 6.1%.

2013; sales $18,781, interest expense $169, net income $1,088, total asset $12,461, dividends ($131), total stockholders equity $4,007,  assumed tax rate 35%

For 2014, calculate:

  • ROA
  • ROCE
  • Operating profit margin
  • Asset turnover
  • Expert Answers

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    For each of the variables, the general equation (a general definition, but given in mathematical terms) is listed below.

    When you answer, make sure you are using the information from 2014 (as the question specifies). Also remember to include the units of currency (here in millions).

    Return on Assets = Net Income/Total Assets.

    Return on Capital Employed = Earnings (before interest and tax) / Employed Capital = Net operative profit/(Total Assets - Current Liabilities)

    Operating profit margin= operation gross profit - operating expenses (i.e. cost of goods labour, etc.). Do not include investment income in the gross profit amount. This is also referred to as 'earnings before interest and tax' or operating income.

    Asset Turnover = Sales / Total Assets. Note that this is also referred to as the asset turnover ratio. 

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