The following information was obtained from the 2020 financial reports of Hathaway Toy Company and Yakima Manufacturing:
Question:
The following information was obtained from the 2020 financial reports of Hathaway Toy Company and Yakima Manufacturing:
Assume that the only change to shareholders' equity during 2020 is due to net income earned in 2020. The number of outstanding shares is 80,000 for Hathaway and 35,000 for Yakima.
INSTRUCTIONS:
a. Which company is more effective at managing the capital provided by the owners?
b. Which company is more effective at managing capital provided by all investors?
c. Compute the earnings per share for each company.
d. Is Yakima Manufacturing using its debt effectively for the equity owners?
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Step by Step Answer:
a To compare the effectiveness of the two companies in managing the capital provided by the owners we can calculate the return on equity ROE ratio for ...View the full answer
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