Sub Station and Planet Sub reported the following selected financial data ($ in thousands). Sub Station’s business strategy is to sell the best tasting sandwich with the highest quality ingredients. Planet Sub’s business strategy is to sell the lowest cost sub on the planet. Sub StationPlanet SubNet sales109,64963,471Net income27,3224,892Total assets, beginning76,58341,199Total assets, ending119,17147,333Required:1. Calculate Sub Station’s return on assets, profit margin, and asset turnover ratio.2. Calculate Planet Sub's return on assets, profit margin, and asset turnover ratio.3-a. Which company has the higher profit margin?Sub Station’sPlanet Sub3-b. Which company has the higher asset turnover?Sub Station’sPlanet Sub3-c. Are the two ratios consistent with the primary business strategies of the two companies?YesNo **Instructions for Calculating Key Financial Ratios****Required:**1. Calculate Sub Station’s return on assets, profit margin, and asset turnover ratio. (Enter your answers in thousands of dollars. For example, 123,000 should be entered as 123.)**Table for Calculations:**The table is divided into three sections for calculating different financial ratios: Return on Assets, Profit Margin, and Asset Turnover.---**Return on Assets:**- **Choose Numerator** ÷ **Choose Denominator** = **Return on Assets**Below this, there are two more lines to fill in additional computations:- **= Return on assets** - This section highlights the final computed ratio in a yellow cell for emphasis.---**Profit Margin:**- **Choose Numerator** ÷ **Choose Denominator** = **Profit Margin**Similarly, it provides space for further calculation:- **= Profit Margin**- Highlighted section to show the final profit margin result in a yellow cell.---**Asset Turnover:**- **Choose Numerator** ÷ **Choose Denominator** = **Asset Turnover**Followed by:- **= Asset Turnover**- The term **"times"** indicates the number of times assets are turned over, with a highlighted cell for clarity.---This structured format guides through calculating and presenting the essential financial ratios required for analyzing the financial performance of Sub Station. Make sure to use the correct financial figures and to interpret the ratios within their context.

Assets turnover ratio is calculated to check the efficiency of the firm. It represents the manner in…

Answered: Sub Station and Planet Sub reported the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Sub Station and Planet Sub reported the following selected financial data ($ in thousands). Sub Station’s business strategy is to sell the best tasting sandwich with the highest quality ingredients. Planet Sub’s business strategy is to sell the lowest cost sub on the planet.

	Sub Station	Planet Sub
Net sales	109,649	63,471
Net income	27,322	4,892
Total assets, beginning	76,583	41,199
Total assets, ending	119,171	47,333

Required:

1. Calculate Sub Station’s return on assets, profit margin, and asset turnover ratio.

2. Calculate Planet Sub's return on assets, profit margin, and asset turnover ratio.

3-a. Which company has the higher profit margin?

Sub Station’s
Planet Sub

3-b. Which company has the higher asset turnover?

Sub Station’s
Planet Sub

3-c. Are the two ratios consistent with the primary business strategies of the two companies?

**Instructions for Calculating Key Financial Ratios**

**Required:**
1. Calculate Sub Station’s return on assets, profit margin, and asset turnover ratio. (Enter your answers in thousands of dollars. For example, 123,000 should be entered as 123.)

**Table for Calculations:**

The table is divided into three sections for calculating different financial ratios: Return on Assets, Profit Margin, and Asset Turnover.

---

**Return on Assets:**

- **Choose Numerator** ÷ **Choose Denominator** = **Return on Assets**

Below this, there are two more lines to fill in additional computations:

- **= Return on assets**
- This section highlights the final computed ratio in a yellow cell for emphasis.

---

**Profit Margin:**

- **Choose Numerator** ÷ **Choose Denominator** = **Profit Margin**

Similarly, it provides space for further calculation:

- **= Profit Margin**
- Highlighted section to show the final profit margin result in a yellow cell.

---

**Asset Turnover:**

- **Choose Numerator** ÷ **Choose Denominator** = **Asset Turnover**

Followed by:

- **= Asset Turnover**
- The term **"times"** indicates the number of times assets are turned over, with a highlighted cell for clarity.

---

This structured format guides through calculating and presenting the essential financial ratios required for analyzing the financial performance of Sub Station. Make sure to use the correct financial figures and to interpret the ratios within their context.

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