Review the time-series of various rates of return and rates of return com- ponents for the...

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Review the time-series of various rates of return and rates of return com- ponents for the Sherwin-Williams Company in Exhibit P2.2. (Sherwin-Williams manufactures, distributes, and sells coatings and related products in North America and South America. It operates four segments: paint stores, consumer, automotive finishes, and international coatings.) a. Discuss the change in the return on assets in the time-series using its components. Discuss the change in the return on equity in the time-series using its components. b. C. Why does the return on equity increase much more than the return on assets during this time period? d. Why is the return on equity less than the return on assets in Year 6? EXHIBIT P2.2 Rates of Return and Components for the Sherwin-Williams Company Year 1 Year 2 Year 3 3 Year 4 Year 6 9.9% 9.5% 17.7% 17.5% 1.80 1.84 6.2% 5.9% 6.1% 5.5% 1.61 1.97 Sherwin-Williams Company Return on assets Return on equity. ROE to ROA.. Unlevered profit margin Levered profit margin Revenue to average total assets... Total assets to common equity 1.60 1.81 8.8% 7.8% 17.4% 16.5% 1.97 6.3% 5.3% 1.39 2.35 2.10 6.4% 5.5% 1.22 2.45 Yea Year 5 8.4% 17.8% 2.11 6.8% 6.1% 1.23 2.38 Year 7 1.4% 8.1% 1.0% 17.8% 0.74 1.0% 0.3% Year 8 Year 9 Year 10 10.0% 10.6% 23.7% 25.3% 9.5% 22.0% 2.21 2.31 5.9% 6.5% 6.6% 2.37 5.2% 6.0% 6.1% 1.37 1.47 1.52 2.49 2.50 2.54 1.34 2.46 2.39 6.9% 6.4% 1.54 2.56 Review the time-series of various rates of return and rates of return com- ponents for the Sherwin-Williams Company in Exhibit P2.2. (Sherwin-Williams manufactures, distributes, and sells coatings and related products in North America and South America. It operates four segments: paint stores, consumer, automotive finishes, and international coatings.) a. Discuss the change in the return on assets in the time-series using its components. Discuss the change in the return on equity in the time-series using its components. b. C. Why does the return on equity increase much more than the return on assets during this time period? d. Why is the return on equity less than the return on assets in Year 6? EXHIBIT P2.2 Rates of Return and Components for the Sherwin-Williams Company Year 1 Year 2 Year 3 3 Year 4 Year 6 9.9% 9.5% 17.7% 17.5% 1.80 1.84 6.2% 5.9% 6.1% 5.5% 1.61 1.97 Sherwin-Williams Company Return on assets Return on equity. ROE to ROA.. Unlevered profit margin Levered profit margin Revenue to average total assets... Total assets to common equity 1.60 1.81 8.8% 7.8% 17.4% 16.5% 1.97 6.3% 5.3% 1.39 2.35 2.10 6.4% 5.5% 1.22 2.45 Yea Year 5 8.4% 17.8% 2.11 6.8% 6.1% 1.23 2.38 Year 7 1.4% 8.1% 1.0% 17.8% 0.74 1.0% 0.3% Year 8 Year 9 Year 10 10.0% 10.6% 23.7% 25.3% 9.5% 22.0% 2.21 2.31 5.9% 6.5% 6.6% 2.37 5.2% 6.0% 6.1% 1.37 1.47 1.52 2.49 2.50 2.54 1.34 2.46 2.39 6.9% 6.4% 1.54 2.56

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a return on assets is derived by dividing the net income by the average total assets the rat... View the full answer