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    07 Activity 2

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    Gillai Marie Ibardolaza
    The document discusses the performance of three divisions of International Heal Medical Company. It provides the operating profit and average assets of each division. The Booboo Division had an operating profit of P24,950 from average assets of P311,900. The Splint Division had P17,500 profit from P177,950 assets. The Intensive Care Division had P28,500 profit from P475,000 assets. The company plans to award the Intensive Care Division based on its highest profit. However, the assistant calculates the return on assets and argues the Splint Division, with the highest ROA of 9.8%, deserves the award instead of the Intensive Care Division with the lowest ROA of 6%.

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    07 Activity 2

    Uploaded by

    Gillai Marie Ibardolaza
    70 views6 pages
    The document discusses the performance of three divisions of International Heal Medical Company. It provides the operating profit and average assets of each division. The Booboo Division had an operating profit of P24,950 from average assets of P311,900. The Splint Division had P17,500 profit from P177,950 assets. The Intensive Care Division had P28,500 profit from P475,000 assets. The company plans to award the Intensive Care Division based on its highest profit. However, the assistant calculates the return on assets and argues the Splint Division, with the highest ROA of 9.8%, deserves the award instead of the Intensive Care Division with the lowest ROA of 6%.

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    The document discusses the performance of three divisions of International Heal Medical Company. It provides the operating profit and average assets of each division. The Booboo Division had an operating profit of P24,950 from average assets of P311,900. The Splint Division had P17,500 profit from P177,950 assets. The Intensive Care Division had P28,500 profit from P475,000 assets. The company plans to award the Intensive Care Division based on its highest profit. However, the assistant calculates the return on assets and argues the Splint Division, with the highest ROA of 9.8%, deserves the award instead of the Intensive Care Division with the lowest ROA of 6%.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    70 views6 pages

    07 Activity 2

    Uploaded by

    Gillai Marie Ibardolaza
    The document discusses the performance of three divisions of International Heal Medical Company. It provides the operating profit and average assets of each division. The Booboo Division had an operating profit of P24,950 from average assets of P311,900. The Splint Division had P17,500 profit from P177,950 assets. The Intensive Care Division had P28,500 profit from P475,000 assets. The company plans to award the Intensive Care Division based on its highest profit. However, the assistant calculates the return on assets and argues the Splint Division, with the highest ROA of 9.8%, deserves the award instead of the Intensive Care Division with the lowest ROA of 6%.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 6

    1.

    The management of
    International Heal Medical
    Company is evaluating the
    performance of its
    three (3) divisions. The Booboo
    Division had operating profit of
    P24,950 and on average used
    assets with a book value of
    P311,900. The Splint Division had
    an operating profit of P17,500 and
    used average assets of P177,950.
    The Intensive Care Division had
    an operating profit of P28,500
    and average assets of P475,000.
    The company is planning to award
    the Intensive Care Division
    relying on its high operating profit.
    Should the management continue
    with this decision? Justify
    your answer.
    1. The management of
    International Heal Medical
    Company is evaluating the
    performance of its
    three (3) divisions. The Booboo
    Division had operating profit of
    P24,950 and on average used
    assets with a book value of
    P311,900. The Splint Division had
    an operating profit of P17,500 and
    used average assets of P177,950.
    The Intensive Care Division had
    an operating profit of P28,500
    and average assets of P475,000.
    The company is planning to award
    the Intensive Care Division
    relying on its high operating profit.
    Should the management continue
    with this decision? Justify
    your answer.
    Name: BSTM 3-1

    1. The management of International Heal Medical Company is evaluating the performance


    of its three (3) divisions. The Booboo Division had operating profit of P24,950 and on
    average used assets with a book value of P311,900. The Splint Division had an operating
    profit of P17,500 and used average assets of P177,950. The Intensive Care Division had
    an operating profit of P28,500 and average assets of P475,000. The company is planning
    to award the Intensive Care Division relying on its high operating profit. Should the
    management continue with this decision? Justify your answer.

    Income
    Return on Assets ¿ or Return on Investments
    Average Total Asset
    Income after income tax
    ¿
    Average Stockholder ' sEquity

    Php . 24 , 950
    Booboo Division:
    Php . 311,900

    = 0.0799 or 0.08 or 8%
    Php. 17,500
    Splint Division:
    Php .177 , 950
    = 0.98 or 9.8%
    Php .28,500
    Intensive Care Division:
    Php .475,000

    = 0.06 or 6%

    In light of my calculations, the administration shouldn't go on with the choice of


    granting the Intensive Care Division because out of the three divisions, it has the most
    reduced ROA with 6%. The one that ought to get the honor is the Splint Division with a 9.8%
    ROA.
    2. Charlie’s Construction Company is a growing construction business that has a few
    contracts to build storefronts in Pasay. Charlie’s balance sheet shows beginning assets
    of P1,000,000 and an ending balance of P2,000,000 of assets. During the current year,
    Charlie’s company had a net income of P20,000,000. Compute for the company’s return
    on assets and interpret the results.

    Average Total Assets = (Php. 1,000.000 + Php. 2,000.000)/2 = Php. 1,500.000

    Income
    Return on Assets =
    Average Total Assets

    Php .20,000 .000


    Return on Assets =
    Php .1,500 .000

    Return on Assets = 13.33333333


    From the calculation, we can see that Charlie's Construction Company has a ROA of
    13.33 or 13. That implies that the business is creating a gigantic gain which is an extremely
    pleasant thing for a business. That likewise implies that the business is moving along as
    expected and working effectively.

    3. Dave’s Guitar Shop is thinking about building an addition onto the back of its existing
    building for more storage. Dave consults with his banker about applying for a new loan.
    The bank asks for Dave’s balance to examine his overall debt levels. The banker
    discovers that Dave has total assets of P5,000,000 and total liabilities of P25,000.
    Compute Dave’s debt ratio.

    Total Liabilities
    Debt Ratio =
    Total Asse ts

    Php .25,000
    Debt Ratio =
    Php .5,000 .000

    Debt Ratio = 0.005 or 0.5%


    Average Stockholder’s Equit

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