Exercise 13-10 Suppose selected comparative statement data for the giant booksel

Question

Exercise 13-10 Suppose selected comparative statement data for the giant bookseller Barnes &Noble; are presented here. All balance sheet data are as of the end of the fiscal year (in millions) Net sales Cost of goods sold Net income Accounts receivable Inventory Total assets Total common stockholders' equity 2019 2018 $5,150 $5,601 3,701 3,901 161 100 1,1501,250 2,850 3,250 890 1,050 65 75 Compute the following ratios for 2019 . (Round asset turnover to 2 decimal places, e.g 1.83 and all other answers to 1 decimal place, e.g. 1.8 or 2.5% (a) Profit margin (b) Asset turnover (c) Return on assets (d) Return on common stockholders' equity (e) Gross profit rate times

Explanation / Answer

2019 a) Profit Margin = Net income / Net sales Net income 65 Net sales 5150 Profit margin 1.3% b) Assets turnover ratio = Net sales / average total assets Net sales 5150 Beginning total assets 3250 Ending total assets 2850 Average total assets 3050 Assets turnover ratio 1.69 c) Return on assets = net income / total assets Net income 65 Total assets 2850 Return on assets 2.3% d) Return on commonstockholders equity = net income / total stockholders equity Net income 65 Beginning stockholders equity 1050 Ending stockholders equity 890 Average stockholders equity 970 Return on stockholders equity 6.7% e) Gross profit Rate = Gross profit / Net sales Net sales 5150 Cost of goods sold 3701 Gross profit 1449 Net sales 5150 Gross profit rate 28.1%

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