Triangle company has acquired a controlling interest in Golden Company. After a thorough study, Triangle Company noted that the Golden Company was too conservatively managed and had thought that with an aggressive leadership, the sales volume, the rate of return on sales and the rate of return for the stockholders can be improved. Accordingly, the company had invested heavily in modern equipment and has promoted additional sales volume. The new management has been in control for the last three years and hereunder are the comparative data based on the annual report submitted under the old and new management.

Old Management	New Management
Current assets	P 640,000	P 900,000
Plant assets, net of depreciation	335,000	1,940,000
Total assets	P 975,000	P 2,870,000
Current liabilities	P 185,000	P 623,500
Long-term notes payable	-	1,000,000
Mortgage payable	75,000	250,000
Capital stock	250,000	250,000
Retained earnings	465,000	746,500
Total equities	P 975,000	P 2,870,000
Net sales	P 1,610,000	P 5,620,000
Net income	P 87,000	P 483,000

As an outside consultant, you have been requested by Triangle to make a comparison between conditions now and conditions under the old management. Your comparison will either support or not support a request for additional loans. Support your evaluation by computing the following relationships from both sets of data: 1. Rate of return on net sales. 2. Rate of return on assets. 3. Rate on return on stockholders' equity. 4. Percentage of debt-to-equity structure.

Answer rating: 100% (QA)

To evaluate the performance under the old and new management we will compute the following relations... View the full answer