Question

AT&T and Verizon produce and market telecommunications products and are competitors. Key financial figures (in \( millions) for these businesses for a recent year follow.

Key Figures (\) millions) AT&T Verizon

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(126,723 \)110,875

Net income . . . . . . . . . . . . . . . . . . . . . . . 4,184 10,198

Average assets . . . . . . . . . . . . . . . . . . . . 269,868 225,233

Required Analysis Component 4. Write a one-paragraph memorandum explaining which company you would invest your money in and why. (Limit your explanation to the information provided.)

Short answer

The return on assets is a profitability ratio and the memorandum written shows that a company with a better profitability measure is good for investing.

Step-by-step solution

Definition of Assets

The return on assets is defined as the profitability ratio which shows how much the company is making in terms of its assets.

Comparison of Return on Assets

The main motive for writing the memorandum as an investor is to analyze which company is better for investing. The investor should look at the profitability measures such as return on assets, profit earned by the company. In this situation, the sales of AT&T are $126,723, and the sales of Verizon are $110,875. Even with higher sales of AT&T, it has lesser net income and returns on assets as compared to Verizon. This makes Verizon a better option for investing.