Question

Suppose selected comparative statement data for the giant bookseller Barnes & Noble are presented here. All balance sheet data are as of the end of the fiscal year (in millions).

		2020		2019
Net sales		$4,800		$5,600
Cost of goods sold		3,888		3,637
Net income		77		147
Accounts receivable		88		109
Inventory		1,314		1,239
Total assets		2,830		3,170
Total common stockholders’ equity		994		980

Compute the following ratios for 2020. (Round asset turnover to 2 decimal places, e.g. 1.67. Round all other answers to 1 decimal place, e.g. 1.6 or 1.6%.)

(a)		Profit margin			%
(b)		Asset turnover			times
(c)		Return on assets			%
(d)		Return on common stockholders’ equity			%
(e)		Gross profit rate			%

Answer 1

a)	Profit Margin = Net Income / Sales
	= $77/4800
	=1.6 %
b)	Average Assets = (beginning Assets + ending Assets)/2
	= ( $3170+2830)/2
	= $ 3000
	Assets Turnover Ratio = Sales / average Assets
	= $4800/3000
	=1.6 times
c)	Return On Assets = Net Income / Average Assets
	= $77/3000
	=2.6 %
d)	Average Stockholders Equity = (beginning Stockholders Equity + ending Stockholders Equity)/2
	= ( $980+994)/2
	= $ 987
	Return On Stockholders Equity = Net Income / Average Stockholders Equity
	= $77/987
	=7.8 %
e)	Gross Profit Margin = Gross Profit / Sales
	= $912/4800
	=19 %