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Submitted By fahadalsobhi
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King Abdul Aziz University

Engineering Management Executive Program

IEEM 680
Financial Analysis & Economics for Engineers

Prof. Seraj Abed

Team members: 1. Fahad Alsobhi 1401722 2. Meshal Alserehi 1401734 3. Anas Shata 1401749

Problem 3-17 Assume the following data for Cable Corporation and Multimedia | | | Cable Corporation | MM Inc | | Net income | $ 30,000 | $ 100,000 | | Sales | 300,000 | 2,000,000 | | Total assets | 400,000 | 900,000 | | Total debt | 150,000 | 450,000 | | Stockholders' equity | 250,000 | 450,000 | | a. Compute return on stockholders' equity for both firms using ratio 3a. Which firm has the higher return? | Cable Corp. | Multi-Media.INC | Return on Equity=Net IncomStockholder Equity | 30,000250000=12% | 100,000450,000=22.2% |
b. Compute the following additional ratios for both firms. Net income/Sales Net income/Total assets Sales/Total assets Debt/Total assets |

| Cable Corporation | Multi-Media.INC | Net IncomSales | 30,000300,000=10% | 100,0002,000,000=5% | Net IncomTotal Asset | 30,000400,000=7.5% | 100,000900,000=11.1% | SalesTotal Asset | 300,000400,000=75% | 2000,000900,000=222.2 | DeptTotal Asset | 150,000400,000=37.5% | 450,000900,000=50% |

C: The equity for multimedia is higher than the cable company. We see that the profit is higher in the cable company by 5%.

Problem 3-21: Jim Short's company makes clothing for schools. Sales in 2010 were $4,000,000. Assets were as follows:
CASH…………………………………………………………..……. 100,000.00
ACCOUNT RECEIVABLE……………………………..……… 800,000.00
INVENTORY……………………………..……………………….. 400,000.00
NET PLANT AND EQUIPMENT……………………………. 500,000.00
TOTAL ASSETS……………………………..……………… 1,800,000.00


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