Performing ratio analysis using real-world data
Cooper Tire Rubber Company claims to be the fourth largest tire manufacturer in North America. Goodyear Tire&Rubber Company is the largest tire manufacturer in North America. The following information was taken from these companies’ December 31, 2007, annual reports. All dollar amounts are in thousands.
| Cooper Tire | Goodyear Tire |
Sales | $2,932,575 | $19,644,000 |
Depreciation costs | 131,007 | 610,000 |
Buildings, machinery, and equipment (net of accumulated depreciation) | 949,458 | 4,383,000 |
Total assets | 2,296,868 | 17,028,000 |
Depreciation method | “Straight-line or accelerated” | Straight-line |
Estimated life of assets: |
|
|
Buildings | 10 to 40 years | 8 to 45 years |
Machinery and equipment | 4 to 14 years | 3 to 30 years |
a.Calculate depreciation costs as a percentage of sales for each company.
b. Calculate buildings, machinery, and equipment as a percentage of total assets for each company.
c. Which company appears to be using its assets most efficiently? Explain your answer.
d. Identify some of the problems a financial analyst encounters when trying to compare the use of long-term assets of Cooper versus Goodyear..
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