Profitability Metrics Macy\'s, Inc. (M) , sells merchandise through company-owne

Question

Profitability Metrics

Macy's, Inc. (M), sells merchandise through company-owned retail stores and Internet website. Recent financial information for Macy's is provided below (all numbers in millions).

Assume the apparel industry's average return on total assets is 8.2%, and the average return on stockholders’ equity is 10.0% for Year 3.

a. Determine the return on total assets for Macy’s for Years 2 and 3. Round your percentage answers to one decimal place.

b. Determine the return on stockholders’ equity for Macy’s for Years 2 and 3. Round your percentage answers to one decimal place.

Year 3 Year 2 Net income $1,526 $1,486 Interest expense 864 804 Year 3 Year 2 Year 1 Total assets $21,461 $21,620 $20,991 Total stockholders' equity 5,378 6,249 6,051

Explanation / Answer

a. Determine the return on total assets for Macy’s for Years 2 and 3. Round your percentage answers to one decimal place.

Average total assets in year 3 = (21461+21620/2) = 21540.50

Average total assets in year 2 = (21620+20991/2) = 21305.50

Return on total assets:

Year 3 = (1526+864)*100/21540.50 = 11.1%

Year 2 = (1486+804)*100/21305.50 = 10.7%

b. Determine the return on stockholders’ equity for Macy’s for Years 2 and 3. Round your percentage answers to one decimal place.

Average total Stockholder's equity year 3 = (5378+6249/2) = 5813.50

Average total Stockholder's equity year 2 = (6249+6051/2) = 6150

Return on Stockholder's equity year 3 = 1526*100/5813.50 = 26.2%

Return on stockholder's equity year 2 = 1486*100/6150 = 24.1%

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