Performing ratio analysis using real-world data
American Greetings Corporation manufactures and sells greeting cards and related items such as gift wrapping paper. CSX Corporation is one of the largest railway networks in the nation. The following data were taken from one of the companies’ December 28, 2007, annual report and from the other’s February 28, 2007, annual report. Revealing which data relate to which company was intentionally omitted. For one company, the dollar amounts are in thousands, while for the other they are in millions.
| Company 1 | Company 2 |
Sales | $10,030 | $1,744,603 |
Depreciation costs | 883 | 46,975 |
Net earnings | 1,336 | 42,378 |
Current assets | 2,491 | 799,281 |
Property, plant, and equipment | 21,780 | 285,072 |
Total assets | $25,534 | $1,778,214 |
Required
a.Calculate depreciation costs as a percentage of sales for each company.
b. Calculate property, plant, and equipment as a percentage of total assets for each company.
c. Based on the information now available to you, decide which data relate to which company. Explain the rationale for your decision.
d. Which company appears to be using its assets most efficiently? Explain your answer.
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