Financial Reporting, Financial Statement Analysis and Valuation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 4, Problem 15PC

Exhibit 4.22 presents selected operating data for three retailers for a recent year. Macy’s operates several department store chains selling consumer products such as brand-name clothing, china, cosmetics, and bedding and has a large presence in the bridal and formalwear markets (under store names Macy’s and Bloomingdale’s). Home Depot sells a wide range of building materials and home improvement products, which includes lumber and tools, riding lawn mowers, lighting fixtures, and kitchen cabinets and appliances. Supervalu operates grocery stores under numerous brands (including Albertsons, Cub Foods, Jewel-Osco, Shaw’s, and Star Market).

Exhibit 4.22

Chapter 4, Problem 15PC, Exhibit 4.22 presents selected operating data for three retailers for a recent year. Macys operates

REQUIRED

  1. a. Compute the rate of ROA for each firm. Disaggregate the rate of ROA into profit margin for ROA and assets turnover components. Assume that the income tax rate is 35% for all companies.
  2. b. Based on your knowledge of the three retail stores and their respective industry concentrations, describe the likely reasons for the differences in the profit margins for ROA and assets turnovers.
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Sandhill 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:   Retail Stores   Internet   Catalog Sales   Sales revenue $12,000,000   $3,700,000   $6,600,000   Variable expenses 4,000,000   1,355,000   1,950,000   Direct fixed expenses 5,960,000   994,500   4,188,000   Average assets 8,000,000   3,700,000   2,000,000   Required rate of return 12%   12%   12%   (a1) Calculate the margin and asset turnover for each of the three distribution channels. (Round answers to 2 decimal places, e.g. 5.12% or 5.12.)   Retail Stores Internet Catalog Sales Margin enter percentages % enter percentages % enter percentages % Asset turnover enter a ratio enter a ratio enter a ratio
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Chapter 4 Solutions

Financial Reporting, Financial Statement Analysis and Valuation

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