Full Points Awarded :) Papa John\'s International is one of the fastest-growing
ID: 2378731 • Letter: F
Question
Full Points Awarded :)
Papa John's International is one of the fastest-growing pizza delivery and carry-out restaurant chains. Presented here are selected hypothetical income statement and balance sheet amounts (in millions). Compute the asset turnover and net profit margin ratios for 2012 and 2011. (Round your answers to 2 decimal places. Omit the "%" signs in your response.) Would analysts be more likely to increase or decrease their estimates of share value on the basis of these changes? Explain by interpreting what the changes in these two ratios mean. (Select all that apply.) The asset turnover ratio measures a company's ability to generate sales while controlling expenses. The asset turnover ratio determines how well assets are used to generate sales. Net profit margin measures a company's ability to control expenses while generating sales. The asset turnover ratio measures a company's ability to control expenses while generating sales.Explanation / Answer
a.)Asset Turnover ratio for 2012=1332/(398+378)/2=3.433 times
Asset Turnover ratio for 2011=1014/(398+375)/2=2.624 times
Net Profit Margin ratio for 2012=(47/1332)*100=%3.53
Net Profit Margin ratio for 2011=(24/1014)*100=%2.37
b.) On the basis of ATR, the restaurant may increase theirestimate of stock value.
Since ATR increased from 2.624 to 3.433, the restaurant is working efficiently
NPM ratio increased from 2.37 to 3.53 which means the restaurant shows better performance in 2012 than in 2011
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