
Explanation:
Analysis: To determine which segment is most likely growing, we need to compare the percentage of capital expenditures to the percentage of total assets for each segment. A segment that is receiving a disproportionately high share of capital expenditures relative to its asset base is likely being invested in for growth.
Segment Analysis:
Conclusion: Segment C has the highest capital expenditure to asset ratio (36%/30% = 1.2), indicating it's receiving disproportionately more investment relative to its current size. This suggests the company is likely growing Segment C more aggressively than the other segments. The higher EBIT margin of Segment A (20%) suggests it's more profitable but may be mature, while Segment C's lower margin (10%) but higher relative investment suggests growth potential.
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An analyst gathers the following information about a company:
| Segment | EBIT Margin | Percentage of Total Assets | Percentage of Total Capital Expenditures |
|---|---|---|---|
| A | 20% | 20% | 20% |
| B | 15% | 50% | 44% |
| C | 10% | 30% | 36% |
Which of the segments is the company most likely growing?
A
Segment A
B
Segment B
C
Segment C