Question

P2.2The Sherwin-Williams Company: 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 b. Discuss the change in the return on equity in the time-series using its components. 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 Sherwin-Williams om pary, Return on assets Return on equity 鶿bear 1 9.9% 17.7% Year 2",Year. Year 4, Years 10.0% 23.7% 2.37 YearS Year 6 YearZ 8.1% 17.8% 2.21 Year 8 9.5% 17.5% 1.84 8.8% 17.4% 1.97 7.8% 16.5% 2.10 8.4% 17.8% 2.11 1.4% 1.0% 0.74 9.5% 22.0% 2.31 Year 10 10.6% 25.3% 2.39 unlevered profit margin 6.2% 5.9% 6.3% 6.4% 6.8% 1.0% 5.9% 6.5% 6.6% 6.9% Levered profit margin 6.1% 5.5% 5.3% 5.5% 6.1% 0.3% 5.2% 6.0% 6.1% 6.4% Revenue to average total assets..1.60 Total assets to common equity ...1.8 1.972.352.45 2.382.462.49 2.50 2.54 2.56 1.61 1.39 1.22 1.23 1.34 1.37 1.47 1.52 1.54

Answer 1