In Mexico, 6 workers, each making the equivalent of $40/day can make a combined total of 40 units/day. In (rural) China, 10 workers, each making the equivalent of $20/day can make a combined total of 70 units/day. In the US, 2 workers, each making the equivalent of $200/day can make a combined total of 150 units/day. Which would be the most appropriate location to manufacture considering direct labor costs alone

US

Explanation:

Particulars  Number    Output    Labor cost  Total        Labor productivity

                    of labor   per day   per day     labor cost     (d ÷ c)

                   (a)               (d)             (b)             c = (a × b)                                              

China            6             40           $40        $240             0.1667

Mexico         10             70          $20        $200            0.3500

US                 2             150         $200     $400            0.3750

As we can see that the labor productivity is more in the US so the same is to be considered as an appropriate location

Deere & Company (DE)

1. Calculation of Ratios:

a) Return on total assets = Net income divided by the average total assets, multiplied by 100.

Year 3  = $1,523.9/$57,965 x 100 = 2.6%

Year 2  = $1,940.0/$ 59,642 x 100 = 3.3%

Year 1 =  $3,161.7 /$ 60,429  x 100 = 5.2%

b) Return on stockholders' equity: Earnings after taxes/Stockholders' equity x 100.

Year 3  = $1,523.9/$ 6,644  x 100 = 22.9%

Year 2  = $1,940.0/$7,912 x 100 = 24.5%

Year 1 =  $3,161.7 /$ 9,667  x 100 = 32.7%

c) Earnings per share: Net Income/No. of outstanding shares.

Year 3  = $1,523.9/315 = $4.84

Year 2  = $1,940.0/334 = $5.81

Year 1 =  $3,161.7 /363 = $8.71

d) Dividend yield:  This is equal to the annual dividend per share divided by stock price per share, and multiplied by 100.

Year 3  = $2.40/$92.03 x 100 = 2.61%

Year 2  = $2.40/$81.10 x 100 = 2.96%

Year 1 = $2.22/$85.58 x 100 = 2.59%

e) Price-earnings ratio:  This is equal to market price per share divided by the earnings per share.

Year 3  = $92.03/$4.84 = 19.0 times

Year 2  = $81.10/$5.81 = 13.9 times

Year 1 = $85.58/$8.71 = 9.8 times

Explanation:

a) Data

                                                Year 3          Year 2         Year 1

                                               ('millions)     ('millions)     ('millions)

Net income (loss)                   $1,523.9       $1,940.0     $3,161.7

Preferred dividends                    $ 0.00          $ 0.00       $ 0.00

Interest expense                      $763.7        $ 680.0     $ 664.0

Shares outstanding                    315              334            363

for computing earnings per share

Cash dividend per share          $ 2.40      $ 2.40        $ 2.22

Average total assets             $57,965    $ 59,642     $ 60,429

Average stockholders' equity  $ 6,644     $7,912       $ 9,667

Average stock price per share  $ 92.03   $ 81.10      $ 85.58

b) Return on total assets = Net income divided by the average total assets, multiplied by 100.  It shows how well a company generates net income from assets.

Year 3  = $1,523.9/$57,965 x 100 = 2.63%

Year 2  = $1,940.0/$ 59,642 x 100 = 3.25%

Year 1 =  $3,161.7 /$ 60,429  x 100 = 5.23%

c) Return on stockholders' equity: Earnings after taxes/Stockholders' equity x 100.  It demonstrates how much of the earnings after taxes are available to stockholders.

Year 3  = $1,523.9/$ 6,644  x 100 = 22.94%

Year 2  = $1,940.0/$7,912 x 100 = 24.52%

Year 1 =  $3,161.7 /$ 9,667  x 100 = 32.71%

d) Earnings per share: Net Income/No. of outstanding shares.  It shows in dollar terms how much of the earnings made by a company is available to stockholders on the average of each share.

Year 3  = $1,523.9/315 = $4.84

Year 2  = $1,940.0/334 = $5.81

Year 1 =  $3,161.7 /363 = $8.71

e) Dividend yield:  This is equal to the annual dividend per share divided by stock price per share, and multiplied by 100.  It shows how a company pays dividend each year in relation to its share price.

Year 3  = $2.40/$92.03 x 100 = 2.61%

Year 2  = $2.40/$81.10 x 100 = 2.96%

Year 1 = $2.22/$85.58 x 100 = 2.59%

f) Price-earnings ratio:  This is equal to market price per share divided by the earnings per share.  It shows if a company is overvalued or undervalued.

Year 3  = $92.03/$4.84 = 19.0 times

Year 2  = $81.10/$5.81 = 13.9 times

Year 1 = $85.58/$8.71 = 9.8 times

g) Ratios are used to present a picturesque view of a company's financial performance and position to make easily understood and compared with other companies in the industry and over the years (trend analysis).  They are important financial management and investment tools, which should, however, not be taken in isolation.