Profit Margin In response to complaints about high prices, a grocery chain runs
ID: 2422672 • Letter: P
Question
Profit Margin In response to complaints about high prices, a grocery chain runs the following advertising campaign: "If you pay a child $1.50 to go buy $50 worth of groceries, then you child makes twice as much on the trip as we do." You've collected the following information from the grocery chain's financial statements:Sales $710
Net Income 10.65
Total assets 390
Total debt 280
Evaluate the grocery chain's claim. What is the basis for this statement? Is this claim misleading? Why or why not? Profit Margin In response to complaints about high prices, a grocery chain runs the following advertising campaign: "If you pay a child $1.50 to go buy $50 worth of groceries, then you child makes twice as much on the trip as we do." You've collected the following information from the grocery chain's financial statements:
Sales $710
Net Income 10.65
Total assets 390
Total debt 280
Evaluate the grocery chain's claim. What is the basis for this statement? Is this claim misleading? Why or why not?
Explanation / Answer
Statement showing computations Particulars Amount Money Paid To a child for buying groceries worth $50 1.50 Profitin % of child = 1.50/50 3.00% Profit earned by Grocery chain on $50 = 1.50/2 0.75 Profit in % = .75/50 1.50% Total sales 710.00 Net Income 10.65 Profit in % = 10.65/710 1.500% Thus grocery chain's claim is right Since Child earns 3% which is twice as much as grocery which earns 1.5% on sales
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