Comparing Profitability and Turnover Ratios for Retail Companies Selected financial statement data for Best Buy Co.,...

Comparing Profitability and Turnover Ratios for Retail Companies

Selected financial statement data for Best Buy Co., Inc., The Kroger Co., Nordstrom, Inc., Staples, Inc., and Walgreen Co. is presented in the following table:

($ millions)	Best Buy	Kroger	Nordstrom	Staples	Walgreen
Sales revenue	$40,339	$108,465	$13,506	$22,492	$76,392
Cost of sales	31,292	85,512	8,406	16,691	54,823
Interest expense	90	488	138	49	156
Net income	1,233	1,728	720	135	1,932
Average receivables	1,294	1,191	2,489	1,883	2,925
Average inventories	5,275	5,670	1,632	2,236	6,464
Average PP&E	2,447	17,403	3,145	1,788	12,198
Average total assets	14,635	29,919	8,910	10,744	36,332

Assume a statutory tax rate of 35% for all companies.

Required
a. Compute return on assets (ROA) profit margin, (PM) and asset turnover (AT) for each company. (Round your answers to one decimal place.)

	Best Buy		Kroger		Nordstrom		Staples		Walgreen
ROA	Answer	%	Answer	%	Answer	%	Answer	%	Answer	%
PM	Answer	%	Answer	%	Answer	%	Answer	%	Answer	%
AT	Answer		Answer		Answer		Answer		Answer

b. Compute accounts receivable turnover (ART), inventory turnover (INVT) and property, plant and equipment turnover (PPET) for each company. (Round your answers to one decimal place.)

	Best Buy	Kroger	Nordstrom	Staples	Walgreen
ART	Answer	Answer	Answer	Answer	Answer
INVT	Answer	Answer	Answer	Answer	Answer
PPET	Answer	Answer	Answer	Answer	Answer

c. Compute the gross profit margin (GPM) for each company. (Round your answers to one decimal place.)

	Best Buy	Kroger	Nordstrom	Staples	Walgreen
GPM	Answer %	Answer %	Answer %	Answer %	Answer %

Solutions

Expert Solution

Answer to a.
Ratio	Formulae	Best Buy	Kroger	Nordstrom	Staples	Walgreen
ROA - Return on assets	Net income divide by Average total assets	=1233 / 14635	=1728 / 29919	=720 / 8910	=135 / 10744	=1932 / 36332
ROA - Return on assets	Net income divide by Average total assets	8.43%	5.78%	8.08%	1.26%	5.32%
PM - Profit Margin	Net income divide by Sales revenue	=1233 / 40339	=1728 / 108465	=720 / 13506	=135 / 22492	=1932 / 76392
PM - Profit Margin	Net income divide by Sales revenue	3.06%	1.59%	5.33%	0.60%	2.53%
AT - Asset turnover	Sales revenue divide by average total assets	=40339 / 14635	=108465 / 29919	=13506 / 8910	=22492 / 10744	=76392 / 36332
AT - Asset turnover	Sales revenue divide by average total assets	2.76	3.63	1.52	2.09	2.10
Note: Net income is calculated after giving adjustment to tax so no changes or adjustment are required
Answer to b.
Ratio	Formulae	Best Buy	Kroger	Nordstrom	Staples	Walgreen
ART - Accounts receivable turnover	Sales revenue divide by average receivables	=40339 / 1294	=108465 / 1191	=13506 / 2489	=22492 / 1883	=76392 / 2925
ART - Accounts receivable turnover	Sales revenue divide by average receivables	31.17	91.07	5.43	11.94	26.12
INVT - Inventory turnover	Cost of sales divide by Average inventories	=31292 / 5275	=85512 / 5670	=8406 / 1632	=16691 / 2236	=54823 / 6464
INVT - Inventory turnover	Cost of sales divide by Average inventories	5.93	15.08	5.15	7.46	8.48
PPET - Property, plant and equipment turnover	Sales revenue divide by Average PP&E	=40339 / 2447	=108465 / 17403	=13506 / 3145	=22492 / 1788	=76392 / 12198
PPET - Property, plant and equipment turnover	Sales revenue divide by Average PP&E	16.49	6.23	4.29	12.58	6.26

Answer to c.
Ratio	Formulae	Best Buy	Kroger	Nordstrom	Staples	Walgreen
INVT - Inventory turnover	Gross profit divide by Sales Gross profit = Sales revenue minus cost of sales	= (40339-31292) / 40339	= (108465-85512) / 108465	= (13506-8406) / 13506	= (22492-16691) / 22492	= (76392-54823) / 76392
INVT - Inventory turnover		22.43%	21.16%	37.76%	25.79%	28.23%

ekkarill92 answered 1 year ago

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