Business Applications Case Performing ratio analysis using real-world data
Couper s fire 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, 2008, annual reports. All dollar amounts are in thousands.
| Cooper Tire | Goodyear Tire |
Sales | $2,881,811 | $19,488,000 |
Depreciation costs | 138,805 | 660,000 |
Buildings, machinery, and equipment (net of accumulated depreciation) | 901,274 | 5,634,000 |
Total assets | 2,042,896 | 15,226,000 |
Depreciation method | Straight-line or accelerated | Straight-line |
Estimated life of assets: |
|
|
Buildings | 10 to 40 years | 5 to 45 years |
Machinery and equipment | 5 to 14 years | 3 to 30 years |
Required
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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