Segment Reporting
TRW, Inc., is a global company that specializes in producing automotive, spacecraft, and information system products. The following (partial) segment data was reported (dollars in millions):
|
December 31 |
||
|
1994 |
1993 |
|
|
Sales: |
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|
Automotive |
$5,679 |
$4,538 |
|
Space and defense |
2,812 |
2,792 |
|
Information systems |
596 |
618 |
|
Operating profit: |
||
|
Automotive |
$476 |
$309 |
|
Space and defense |
175 |
199 |
|
Information systems |
96 |
74 |
|
Identifiable assets: |
||
|
Automotive |
$3,481 |
$3,004 |
|
Space and defense |
1,111 |
1,253 |
|
Information systems |
622 |
752 |
Required
a. Calculate the return on assets of 1994 for each segment (use operating profit and ignore interest expense).
b. Calculate each segment’s operating income as a percentage of sales.
c. Why is the segment-by-segment information important for an investor to have? Which ratio results will be most important to investor