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$109,349 $63,171 Net income 27,022 4,592 Total assets, beginning 76,283 40,599 Total assets, ending 118,571 46,733 3-a. Which company has the higher profit margin? multiple choice 1Sub Station’sPlanet Sub 3-b. Which company has the higher asset turnover? multiple choice 2Sub Station’sPlanet Sub 3-c. Are the two ratios consistent with the primary business strategies of the two companies? multiple choice 3YesNo

The ratio analysis helps to analyse the financial statements of the business.

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	$	109,349		$	63,171
Net income		27,022			4,592
Total assets, beginning		76,283			40,599
Total assets, ending		118,571			46,733

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

multiple choice 1

Sub Station’s
Planet Sub

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

multiple choice 2

Sub Station’s
Planet Sub

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

multiple choice 3

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