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Chapter I

Accounting in Business

21

Best Buy's returns show an increase in its productive use of assets in recent years. We also compute Circuit City's returns in the third column of Exhibit1.12. In four of the five years, Best Buy's return exceeds Circuit City's, and its average return is higher for this period. We also compare Best Buy's return to the normal return for similarmerchandisers of electronic products (fourth column). Industry averages are available from services such as Dun & Bradstreet's Industry Norms and Key Ratios aiid Robert Morris Associates' Annual StatementStudies. When compared to the industry, Best Buy performs well. •-

Each Decision Analysis section ends with a role-playing scenario to show the usefulness of ratios.

Decision Makermmmmftammmmmmmmmmrngmmmammmmmmmmmmm K •:

Business Owner You own a small winter ski resort that earns a 21 % return on its assets. An opportunity to purchase a winter ski equipment manufacturer is offered toyou.This manufacturer earns a 19% return on its assets.The industry return for this manufacturer is 14%. Do you purchase this manufacturer! [Answer^-p. 26]

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Demonstrot/on Problem is a review of keychapter content The Planning the Solution offers strategies in Solving th

Demonstration Problem
After several months of planning, Jasmine Worthy started a haircutting business called Expressions.The following events occurred during its first month of business. a. b. c. d. e. f. g. h. i. j. k. On August 1, Worthy invested $3,000 cash and $15,000 of equipment in Expressions. On August 2,Expressions paid $600 cash for furniture for the shop. On August 3, Expressions paid $500 cash to rent space in a strip mall for August. On August 4, it purchased $ 1,200 of equipment on credit for the shop(using a long-term note payable). On August 5, Expressions opened for business. Cash received from haircutting services in the first week and a half of business (ended August 15) was $825. On...
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