Question

The following information is available from the audited financial statements of Molson Coors Brewing Company and Big Rock Breweries Income Trust for their recent year ends.

Molson/Coors
(in millions of US dollars) Big Rock Breweries
(in thousands of Cdn dollars)
Net Sales $ 5,844 $ 38,701
Profit $ 373 $ 8,380
Total assets, ending $ 11,603 $ 42,170
Total assets, beginning $ 11,799 $ 41,786

Instructions:

a) Calculate both companies' asset turnover and return on assets ratios.
b) Compare the companies' effectiveness in using their assets to produce sales and profit.

Answer 1

Working:

	Molson Coors Brewing Co.	Big Rock Breweries
Total assets, beginning	11799	41786
Total assets, ending	11603	42170
Total	23402	83956
Average total assets	11701	41978
Net sales	5844	38701
Asset turnover = Net sales / Average total assets	0.50	0.92
Profit	373	8380
Return on assets = Profit/ Average total assets	3.19%	19.96%

a)

	Molson Coors Brewing Co.	Big Rock Breweries
Asset turnover	0.50 times	0.92 times
Return on assets	3.19%	19.96%

b) Big Rock Breweries generates $0.92 of sales for every $1 invested in assets while Molson Coors generates $0.50 for every $1 invested. Hence, Big Rock is using its assets more effectively.

Big Rock Breweries is generating a return of 19.96% on its assets as against the 3.19% generated by Molson Coors.

Thus, Big Rock Breweries is using its assets more effectively to generate sales and profit.