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 $6 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:

thanks for the help

In response to complaints about high prices, a grocery chain runs the following advertising campaign: “If you pay your child $6 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:

Explanation / Answer

Profit margin for child = net income*100/revenues = 6*100/(50) = 12%

Profit margin for company = net income*100/revenues =(6/2)*100/(50) = 6%

ROE

Equity = assets-debt = 490-360 = 130

ROE = net income/equity = 35.4*100/130 = 27.23%

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