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ratio analysis: Net income/total assets; Debt/total assets

6. XYZ Company posts the following results along with information from comparable companies.

XYZ company Industry data
Year Net income Total Assets (net income / total assets)
1998 $350,000 $2,800,000 11.5%
1999 375,000 3,200,000 8.4%
2000 375,000 3,750,000 5.5%

Year Debt Total Assets (debt / total assets) 1998 $1,624,000 $2,800,000 54.1%
1999 1,730,000 3,200,000 42.0%
2000 1,900,000 3,750,000 33.4%

As an industry analyst comparing firms, are you more likely to praise or criticize XYZ company in terms of these indices and why:
? Net income / total assets?
? Debt / total assets?

Solution Preview

XYZ
1998 1999 2000
Net Income/Total Assets 12.50% 11.72% 11.72%
Industry data 11.50% 8.40% 5.50%
Comments Favorable Favorable Favorable
(Its favorable as Company's ratios are better than ...

Solution Summary

This explains the steps to compute the ratio analysis: Net income/total assets; Debt/total assets

$2.19