Question

In: Accounting

Using fixed asset disclosure to compare companies'/Fixed asset turnover and average age of depreciable assets The...

Using fixed asset disclosure to compare companies'/Fixed asset turnover and average age of depreciable assets

The following PP & E information for fiscal year 2017 is available:

Harley Davidson

Amazon

( in millions)

Walgreens

Net sales

$4,915

$107,006

$117,351

Historical cost

$3,285.3

$68,573

$22,935

Accumulated depreciation

2,317.5

19,707

8,600

Net PP & E

$ 967.8

$48,866

$14,335

Annual depreciation

222

11,478

1,718

Capital expenditures

206

11,995

1,325

Depreciation method

SL

SL

SL

Useful life- Buildings

30

20-40

20-50

Useful life- Furniture & Fixtures

5

3-10

3-20

Useful tife- IT Equipment

3-7

3-5

3-5

Required:

  1. Estimate the total useful life, age and remaining useful life for each company.
  2. Interpret the estimates. What items might effect comparisons across these companies
  3. Calculate and compare fixed asset turnover for each company

Solutions

Expert Solution

( in millions)
Harley Davidson Amazon Walgreens
Net sales 4,915 1,07,006 1,17,351
Net PP & E 967.8 48,866 14,335
Fixed Asset turnover ( Net Sales / Net PP& E)              5.08       2.19             8.19
Historical cost 3,285.30 68,573 22,935
Annual depreciation 222 11,478 1,718
Total useful life ( Historical cost / Annual depreciation)            14.80       5.97           13.35
Remaining useful life ( Net PP&E / Annual depreciation              4.36       4.26             8.34
Age ( Acc depreciation Annual depreciation )            10.44       1.72             5.01

In case of Amazon the composition of PP&E mainly consist of majorily IT equipment followed by furnitures , hence there is High annual charge as compared to Harley Davidson and Walgreens

ekkarill92 answered 2 months ago
Next > < Previous

Related Solutions

Total asset turnover 1.5 times Average collection period​ (assume 365-day​ year) 15 days Fixed asset turnover...
Total asset turnover 1.5 times Average collection period​ (assume 365-day​ year) 15 days Fixed asset turnover 5 times Inventory turnover​ (based on cost of goods​ sold) 3 times Current ratio 2.0 times Sales​ (all on​ credit) ​$4,000,000 Cost of goods sold 75% of sales Debt ratio 40% Fill in the assets section of the pro forma balance sheet.  ​(Round all items to the nearest​ dollar.) Cash ​$ Accounts receivable Inventories Net fixed assets Total assets ​$ Fill in the liabilities...
The total asset turnover should generally be higher in value than the fixed-asset turnover. A. True...
The total asset turnover should generally be higher in value than the fixed-asset turnover. A. True B. False
Discuss when total asset turnover would be more important than fixed asset turnover. Provide an example.
Discuss when total asset turnover would be more important than fixed asset turnover. Provide an example.
Discuss when total asset turnover would be more important than fixed asset turnover. Provide an example.
Discuss when total asset turnover would be more important than fixed asset turnover. Provide an example.
Avery Corporation made the following determinations about three depreciable assets: ? Depreciable asset M was purchased...
Avery Corporation made the following determinations about three depreciable assets: ? Depreciable asset M was purchased on January 1, 2015. The original cost was $114,000 and this amount was entirely expensed in 2015. This particular asset has an 8-year useful life and no salvage value. The straight-line method should have been used for depreciation purposes. ? Depreciable asset N was purchased January 1, 2016. It originally cost $540,000 and, for depreciation purposes, the sum-of-the-years’ digit method was originally chosen. The...
Total assets turnover: 1x Days sales outstanding: 37 daysa Inventory turnover ratio: 6x Fixed assets turnover:...
Total assets turnover: 1x Days sales outstanding: 37 daysa Inventory turnover ratio: 6x Fixed assets turnover: 3x Current ratio: 2.5x Gross profit margin on sales: (Sales - Cost of goods sold)/Sales = 15% aCalculation is based on a 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent. Balance Sheet Cash $ Current liabilities $ Accounts receivable Long-term debt 30,000 Inventories Common stock Fixed assets Retained earnings 60,000 Total assets $200,000 Total liabilities and equity $...
A fixed asset turnover ratio of 0.72 means that: A. For every $1 in net fixed...
A fixed asset turnover ratio of 0.72 means that: A. For every $1 in net fixed assets, a firm can generate $0.72 in net income. B. For every $1 in net fixed assets, a firm can generate $0.72 in sales. C. For every $1 in total assets, a firm can generate $0.72 in net income. D. For every $1 in net fixed assets, a firm can borrow $0.72. E. For every $1 in total assets, a firm can generate $0.72...
Carmax AutoNation Account receivable turnover 30.7 22.55 Inventory turnover 6.56 5.12 Fixed asset turnover 6.89 6.74...
Carmax AutoNation Account receivable turnover 30.7 22.55 Inventory turnover 6.56 5.12 Fixed asset turnover 6.89 6.74 For each of the accounts receivable, inventory, and fixed asset turnover ratios, indicate whether the relative size of the ratios for the two firms contributes to (helps explain) the difference in the asset turnover ratio and the difference in the ROA. To answer this question, you need to discuss the relationship of each of the accounts receivable, inventory, and fixed asset turnover ratios with...
What is the average collection period, inventory turnover, and total asset turnover for P&G from 2016,...
What is the average collection period, inventory turnover, and total asset turnover for P&G from 2016, 2017, and 2018 using http://financials.morningstar.com/balance-sheet/bs.html?t=PG&region=usa&culture=en-US http://financials.morningstar.com/income-statement/is.html?t=PG&region=usa&culture=en-US http://financials.morningstar.com/cash-flow/cf.html?t=PG&region=usa&culture=en-US
A firm’s Return on Assets is 10%, its Total Asset Turnover is 2,and its Debt...
A firm’s Return on Assets is 10%, its Total Asset Turnover is 2, and its Debt Ratio is 0.75. This firm’s Profit Margin on Sales is:a.20%b.need to know what its Earnings After Tax arec.5%d.need to know what its Revenues are
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT