Sub Station and Planet Sub reported the following selected financial data. 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 Net sales Net income Total assets, beginning Total assets, ending Required: Planet Sub $110,149 $63,971 27,822 5,392 77,083 42,199 120,171 48,333 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 more favorable profit margin? 3-b. Which company has the more favorable asset turnover? 3-c. Are the two ratios consistent with the primary business strategies of the two companies?

Sub Station and Planet Sub reported the following selected financial data. 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 Net sales Net income Total assets, beginning Total assets, ending Required: Planet Sub $110,149 $63,971 27,822 5,392 77,083 42,199 120,171 48,333 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 more favorable profit margin? 3-b. Which company has the more favorable asset turnover? 3-c. Are the two ratios consistent with the primary business strategies of the two companies?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Kellogg Company has its headquarters in Battle Creek, Michigan. The company manufactures and sells ready-to-eat breakfast cereals and convenience foods including cookies, toaster pastries, and cereal bars. Selected data from Kellogg Company’s recent annual report follows (dollar amounts in millions). Current Year Prior Year 2 Years Ago Sales $14,580 $14,792 $14,197 Gross profit % 34.73 41.26 38.28 Operating profit 1,024 2,837 1,562 Net cash flow less capital expenditures 1,211 1,170 1,225 Net earnings 633 1,808 961 In its annual reports, Kellogg Company has indicated that it plans to achieve sustainability of its operating results with operating principles that emphasize profit-rich, sustainable sales growth, as well as cash flow and return on invested capital. Kellogg believes its steady earnings growth, strong cash flow, and continued investment during a multi-year period demonstrates the strength and flexibility of its business…
go.3
Please help me
Sub Station and Planet Sub reported the following selected financial data ($ 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 2. Calculate Planet Sub's return on assets, profit margin, and asset turnover ratio. (Enter your answers in thousands of dollars. (i.e. 123,000 should be entered as 123).) Return on Assets Choose Numerator ÷ Choose Denominator = Return on Assets ÷ = Return on assets ÷ = Profit Margin Choose Numerator ÷ Choose Denominator = Profit Margin ÷ = Profit Margin ÷ = Asset Turnover Choose Numerator ÷ Choose Denominator = Asset Turnover ÷ =…
Lannion and Co. Is engaged in providing and marketing a standard advice service. Summarized results for the past two months reveal the following: Sales (units of the service) Sales revenue (€) Operating profit (€) October November 200 300 5.000 7.500 1.000 2.200 There were no price changes of any description during these two months. Required: a) Deduce the BEP (in units of the service) for Lannion and Co. b) State why the business might find it useful to know its BEP.
Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Total $ 4,180,000 1,248,000 2,932,000 2,180,000 $ 752,000 Answer is complete but not entirely correct. $ (52,100) Required: What is the financial advantage (disadvantage) of discontinuing the Linens Department? Financial (disadvantage) Department Hardware $ 3,100,000 830,000 2,270,000 1,380,000 $ 890,000 A study indicates that $378,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 12% decrease in the sales of the Hardware Department. Linens $ 1,080,000 418,000 662,000 800,000 $ (138,000)
Leapin’ Larry’s Pre-Owned Cars has two divisions, Operations and Financing. Operations is responsible for selling Larry’s inventory as quickly as possible and purchasing cars for future sale. Financing Division takes loan applications and packages loans into pools and sells them in the financial markets. It also services the loans. Both divisions meet the requirements for segment disclosures under accounting rules. Operations Division had $32 million in sales last year. Costs, other than those charged by Financing Division, totaled $18 million. Financing Division earned revenues of $9 million from servicing loans and incurred outside costs of $10 million. In addition, Financing charged Operations $8 million for loan-related fees. Operations’s manager complained to Larry that Financing was charging twice the commercial rate for loan-related fees and that Operations would be better off sending its buyers to an outside lender. Financing's manager replied that although commercial rates…
Calculate the net margin and indicate which of the two companies is more profitable. Agricorp Multigrain Net sales ( all on credit) $603,000 $519,000 Cost of goods sold $454,000 $387,000 Income from operations $93,000 $72,000 Interest expense $- $8,000 Net income $93,000 $38,000 Group of answer choices Agricorp Multigrain Non of the two companies are profitable Both companies are equally profitable Previous
Olly Company is a merchandising business that sells dog food. Based on the following information, what is the gross margin for Olly Company? Sales Revenue Cash $ 500,000 100,000 50,000 Accounts Receivable Inventory Cost of goods sold Operating expenses Multiple Choice $135,000 $200,000 $285,000 $160,000 25,000 300,000 40,000
Blossom Decor sells home decor items through three distribution channels-retail stores, the Internet, and catalog sales. Each distribution channel is evaluated as an investment center. Selected results from the latest year are as follows: Sales revenue Variable expenses Direct fixed expenses Average assets Required rate of return (a) Retail Online Catalog $ $ Retail Stores Internet $ $10,120,000 4,070,000 4,570,000 8,070,000 12% $4,070,000 Residual Income. 1,620,000 1,120,000 4,070,000 12% Calculate the current residual income for each distribution channel. (If the residual income is a loss then enter with a negative sign preceding the number, e.g. -5,125 or parenthesis, e.g. (5,125).) Catalog Sales $3,400,000 1,920,000 1,320,000 1,610,000 12%
Kingsbury Manufacturing has net sales revenue of $800,000, cost of goods sold of $343,600, and all other expenses of $327,800. The net profit margin is: Multiple Choice 0.37 0.16 0.57 0.84 < Prev Next im 39 of 50
Outdoor World, Inc., manufactures camping equipment. Shown for the current year are the income statement for the company and a common size summary for the industry in which the company operates. Outdoor World, Inc. Industry Average Sales (net) $ 20,000,000 100 % Cost of goods sold 9,800,000 58 Gross profit on sales $10,200,000 42 % Operating expenses: Selling $ 4,200,000 16 % General and administrative 3,400,000 20 Total operating expenses $7,600,000 36 % Operating income $ 2,600,000 6 % Income tax expense 1,200,000 3 Net income $1,400,000 3 % Return on assets 23 % 14% Required: a. Prepare a common size income statement. The first column should show for Outdoor World, Inc., all items expressed as a percentage of net sales. The second column has been completed and shows the equivalent industry average for the data given in the problem. The purpose of this common size statement is to compare the operating results of Outdoor World, Inc., with the average for the industry. b. If results of…