American Greetings Corporation manufactures and sells greeting cards

Exercise 6-21 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 25, 2015, annual report and from the other’s February 28, 2015, 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

Sales $2,010,969

Depreciation Costs $56,056

Net Earnings $65,107

Current Assets $633,417

Property, plant, and equipment $380,297

Total Assets $1,535,695

Company 2

Sales $11,811

Depreciation Costs $1,208

Net Earnings $1,968

Current Assets $2,966

Property, plant, and equipment $30,174

Total Assets $35,039

Required

a.  Calculate depreciation costs as a percentage of sales for each company. (Round to three decimal places.)

b. Calculate property, plant, and equipment as a percentage of total assets for each company. (Round to three decimal places.)

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.

Here’s the SOLUTION

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