Question

Analysis and Interpretation of Profitability Balance sheets and income statements for Best Buy Co., Inc. follow. Consolidated Statements of Earnings For Fiscal Years Ended ($ millions) February 27, 2010 February 28, 2009 March 1, 2008 Revenue $ 49,694 $ 45,015 $ 40,023 Cost of goods sold 37,534 34,017 30,477 Restructuring charges - cost of goods sold -- -- -- Gross Profit 12,160 10,998 9,546 Selling, general and administrative expenses 9,873 8,984 7,385 Restructuring charges 52 78 -- Goodwill and tradename impairment -- 66 -- Operating income 2,235 1,870 2,161 Other income (expense) Investment income and other 54 35 129 Investment impairment -- (111) -- Interest expense (94) (94) (62) Earnings before income tax expense and equity in income of affiliates 2,195 1,700 2,228 Income tax expense 802 674 815 Equity in income of affiliates 1 7 (3) Net earnings including noncontrolling interest 1,394 1,033 1,410 Net income attributable to noncontrolling interest (77) (30) (3) Net income attributable to Best Buy Co., Inc. $ 1,317 $ 1,003 $ 1,407 Consolidated Balance Sheets ($ millions, except footnotes) February 27, 2010 February 28, 2009 Assets Current assets Cash and cash equivalents $ 1,826 $ 498 Short-term investments 90 11 Receivables 2,020 1,868 Merchandise inventories 5,486 4,753 Other current assets 1,144 1,062 Total current assets 10,566 8,192 Property and equipment Land and buildings 757 755 Leasehold improvements 2,154 2,013 Fixtures and equipment 4,447 4,060 Property under capital lease 95 112 7,453 6,940 Less: Accumulated depreciation 3,383 2,766 Property and equipment, net 4,070 4,174 Goodwill 2,452 2,203 Tradenames, net 159 173 Customer relationships, net 279 322 Equity and other investments 324 395 Other noncurrent assets 452 367 Total assets $ 18,302 $ 15,826 Liabilities and equity
Current liabilities
Accounts payable	$ 5,276	$ 4,997
Unredeemed gift card liabilities	463	479
Accrued compensation and related expenses	544	459
Accrued liabilities	1,681	1,382
Accrued income taxes	316	281
Short-term debt	663	783
Current portion of long-term debt	35	54
Total current liabilities	8,978	8,435
Long-term liabilities	1,256	1,109
Long-term debt	1,104	1,126
Equity
Best Buy Co., Inc. Shareholders' equity
Preferred stock, $1.00 par value	--	--
Common stock, $0.10 par value	42	41
Additional paid-in capital	441	205
Retained earnings	5,797	4,714
Accumulated other comprehensive income (loss)	40	(317)
Total Best Buy Co., Inc. shareholders' equity	6,320	4,643
Noncontrolling interest	644	513
Total equity	6,964	5,156
Total liabilities and equity	$ 18,302	$ 15,826

NOTE: Use net income attributable to controlling interests in your computations, when applicable.

a. Compute ROE for 2010.

Do not round until your final answer. Round your answer to two decimal places.

ROE =Answer%

b. Confirm that ROE equals ROE computed using the component measures for profit margin, asset turnover, and financial leverage using: ROE = PM * AT * FL.

   Compute the components of ROE.

   Do not round until your final answer. Round answers to two decimal places.
   PM =Answer%
   AT =Answer
   FL =Answer


c. Compute adjusted ROA. Assume a tax rate of: 37.0%.

Round your answer to two decimal places.
Adjusted ROA =Answer%

Answer 1

1. 2011 current ratio = current assets/current liabilities

= 10,473 /8,663 = 1.21

                       2010 current ratio = current assets/current liabilities

                                                                = 10,566 / 8,978 = 1.18

                2011 quick ratio =cash &cash equivalents + receivables + short term securities/current liabilities

                                                = 1,103 + 2,348 + 22 / 8,663 = 3,473/8,663 =0.40

              2010 quick ratio =cash &cash equivalents + receivables + short term securities/current liabilities

                                                = 1,826 + 2,020 +90 /8978 =3,936/8,978 = 0.44

b)2011 times interest earned = Earnings before interest & tax / Interest expense

                                                         = 2,114 + 51 + 2/87 = 2,167/87 = 24.90

2010 times interest earned = Earnings before interest & tax / Interest expense

                                                      = 2,235 +54 + 1 / 94 = 2,290/94 = 24.36

2011 liabilities to equity =Total liabilities/share holders equity

                                                = 8,663 + 1,183 + 711 /7,292 = 10,557/7,292 = 1.45

2010 liabilities to equity =Total liabilities/share holders equity

                                                = 8,978 + 1,256 + 1,104 /6,964 = 11,338/6,964=1.63