expense to sales ratio for each company. ue t sales ratio and the selling. gener
ID: 2340338 • Letter: E
Question
expense to sales ratio for each company. ue t sales ratio and the selling. general Compare the relative profitability of these pharmaceutical companies ring Profitability and Turnover Ratios for Retail Companies c. ected financial statement data for Best Buy Co., Inc. The Kroger Co. Nordstrom, Ine. LO3 Inc. , and Walgreen Co. is presented in the following table: S millions Sales Cost of sales31.292 Best Buy Co, Inc Best Buy Kroger Nordstrom Staples Walgreern The Kroger Co 85,512 8,40616,69154,823 156 1,932 2,925 6,464 1,788 12,198 29,919 8,91010,74436.332 NYSE:KR Nordstrom, Inc. NYSE:JWN Staples, Inc NASDAG:SPLS Walgreen Co. 1,233 1,294 447 5,6702,489 17,403 3,145 488 1,728 1,191 138 720 135 1,883 2,236 Average receivables. YSE WAG 5,6701,632 Average PP&E ....2,447 Average total assets....14,635 REQUIRED Compute return on assets (ROA) profit margin (PM) and asset turnover (AT) for each com- pany. Discuss the relative importance of PM and AT for each company a.
Explanation / Answer
A.) Return on assets = net income/average total assets
Profit Margin = Net profit/sales
Asset turnover = net sales/average assets
Profit margin indicates the profit earned per dollar of sales.Nordstorm having good PM ratio and while Best Buy and Walgreen are above par but major concern is for Krpger and Staples as they are positive but very near to 0.
Asset turnover ratio measures the value of a company's sales or revenues generated relative to the value of its assets. kroger is having the highest and Nordstorm is lowest and balance are in middle of them. Although all are quite deecent.
B.) Account receibable turnover = net sales/average turnover
Inventory turnover = cost of goods sold/average inventory
PPE turnover = net sales/average PPE
C.) Gross profit margin = (sales - Cost of goods sold)/sales
Gross profit margin differs due the diffrent cost from suppliers, pricing policy of companies, intensity of competition.
Best buy Kroger Nordstorm Staples Walgreen ROA 1233/14635 = 8.43% 1728/29919 = 5.78% 720/8910 = 8.08% 135/10744 = 1.26% 1932/36332 = 5.32% PM 1233/40339 = 3.06% 1728/108465 = 1.59% 720/13506 = 5.33% 135/22492 = 0.60% 1932/76392 = 2.53% AT 40339/14635 = 2.76 108465/29919 = 3.63% 13506/8910 = 1.52 22492/10744 = 2.09 76392/36332 = 2.10Related Questions
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