Question

Selected hypothetical 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).

		2022		2021
Net sales		$5,350.6		$5,700.8
Cost of goods sold		3,400.4		3,600.5
Net income		75.2		140.4
Accounts receivable		75.1		100.0
Inventory		1,150.0		1,250.0
Total assets		2,850.0		3,150.0
Total common stockholders’ equity		890.1		1,070.2

Compute the following ratios for 2022. (Round asset turnover to 2 decimal places, e.g 1.83 and all other answers to 1 decimal place, e.g. 1.8 or 2.5%)

(a)		Profit margin		enter profit margin in percentages rounded to 1 decimal place	%
(b)		Asset turnover		enter asset turnover in times rounded to 2 decimal places	times
(c)		Return on assets		enter return on assets in percentages rounded to 1 decimal place	%
(d)		Return on common stockholders’ equity		enter return on common stockholders' equity in percentages rounded to 1 decimal place	%
(e)		Gross profit rate		enter gross profit rate in percentages rounded to 1 decimal place

Answer 1

Ans. A	Profit margin = Net income / Net sales * 100
	$75.2 / $5,350.6 * 100
	1.4%
Ans. B	Assets turnover = Sales / Average assets
	$5,350.6 / $3,000
	1.78	times
	*Average assets = (Beginning assets + Ending assets) / 2
	($3,150.0 + $2,850.0) / 2
	$3,000.00
Ans. C	Return on assets =   Net income / Average assets * 100
	$75.2 / $3,000 * 100
	2.5%
Ans. D	Return on Common stockholder's equity =   Net income / Average Common stockholder's equity * 100
	$75.2 / $980.15 * 100
	7.7%
	* Average Stockholder's equity =   (Beginning equity + Ending equity) / 2
	($1,070.2 + $890.1) / 2
	$980.15
Ans. E	Gross profit margin = Gross profit / Net sales * 100
	$1,950.2 / $5,350.6 * 100
	36.4%
	*Calculations for Gross profit:
		2021
	Net sales	$5,350.6
	Less: Cost of goods sold	$3,400.4
	Gross profit	$1,950.2