Question

Here are figures given by two companies: BUD and TAP.

Company Name			Anheuser-Busch	Molsen Coors
Stock Symbol			BUD	TAP
Year			2004	2004
Income Statement
	Sales		14,934	4,305
	Net Income		2,240	196
Balance Sheet
	Assets		16,173	4,657
	Shareholder's Equity		2,668	1,601

Please fill in the blanks in the table below (round to the 2nd decimal place)

Ratio	Anheuser-Busch (BUD)	Molsen Coors (TAP)
1. Profit Margin
2. Asset Turnover
3. Return on Assets (1 x 2)
4. Financial Leverage
5. Return on Equity

Answer 1

1. Profit Margin = Net Income / Sales

For BUD,

Profit Margin = 2240 / 14934 ==> 15%

For TAP,

Profit Margin = 196/ 4305 ==> 4.55%

2. Asset Turnover = Sales / Assets

For BUD,

Asset Turnover = 14934 / 16173 ==> 0.92

For TAP,

Asset Turnover = 4305 / 4657 ==> 0.92

3. Return on Asset = Net Income / Assets or [Profit Margin * Asset Turnover]

For BUD,

15% * 0.92 ==> 13.80%

For TAP,

4.55% * 0.92 ==> 4.19%

4. Financial Leverage = Debt / Equity

For BUD ,

Debt = Total Asset - Equity

= 16173 - 2668

= 13505

Financial Leverage = 13505 / 2668 ==> 5.06

For TAP,

Debt = Total Asset - Equity

= 4657 - 1601

= 3056

Financial Leverage = 3056 / 1601 ==> 1.91

5. Return on Equity = Net Income / Equity

For BUD,

Return on Equity = 2240 / 2668 ==> 83.96%

For TAP,

Return on Equity = 196 / 1601 ==> 12.24%