Profit margins and Asset turnover

Blythe Corporation and Jacke Corporation, two companies of roughly the same size, are both involved in the manufacture of shoe-tracing devices. Each company depreciates its plant assets using the straight-line approach. An investigation of their financial statements reveals the information shown below.

Blythe Corp. Jacke Corp.

Net income $ 240,000 $ 300,000

Sales revenue 1,150,000 1,200,000

Total assets (average) 3,200,000 3,000,000

Plant assets (average) 2,400,000 1,800,000

Intangible assets (goodwill) 300,000 0

Instructions

(a) For each company, calculate these values:

Return on assets.

Profit margin.

Asset turnover.

(b) Based on your calculations in part (a), comment on the relative effectiveness of the two companies in using their assets to generate sales. What factors complicate your ability to compare the two companies?

Compute depreciation under different methods.