In response to complaints about high prices, a grocery chain runs the following

Question

In response to complaints about high prices, a grocery chain runs the following advertising campaign: “If you pay your child $3 to go buy $50 worth of groceries, then your child makes twice as much on the trip as we do.” You’ve collected the following information from the grocery chain’s financial statements: (millions) Sales $ 700.0 Net income 21.0 Total assets 430.0 Total debt 300.0 What is the profit margin for child as a percentage of what they spend and the profit margin for the store? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Profit margin Child % Store % What is the store's ROE? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) ROE %

Explanation / Answer

Child's profit margin = earned/spent*100

= 3/50*100 = 6%

(#given in te ques it is to be calculated as a percentage o f what is spent)

Store's Profit margin = net income/sales *100

= 21/700*100 = 3%

ROE = earning/net assets*100

=21/(430-300)*100

= 16.15%

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