Compute ROA, Profit Margin, and Asset Turnover Refer to the financial informatio
ID: 2432285 • Letter: C
Question
Compute ROA, Profit Margin, and Asset Turnover
Refer to the financial information for Target Corporation, presented below:
a. Compute its return on assets (ROA) for the fiscal year ending January 31, 2015.
Compute ROA using net earnings (loss). Assume a statutory tax rate of 35%.
Round your answer to one decimal place. Use negative sign with answer, if appropriate.
Return on Assets = Answer
%
b. Disaggregate ROA into profit margin (PM) and asset turnover (AT).
Round your answers to one decimal place. Use negative sign with answers, if appropriate.
Profit Margin = Answer
%
Asset Turnover = Answer
Balance Sheets
($ millions) January 31,
2015 February 1,
2014 Assets Cash and cash equivalents $2,210 $670 Inventory 8,790 8,278 Other current assets 3,087 2,625 Total current assets 14,087 11,573 Property and equipment, net 25,958 26,412 Other noncurrent assets 1,359 6,568 Total assets $41,404 $44,553 Liabilities and shareholders’ investment Accounts payable $7,759 $7,335 Accrued and other current liabilities 3,886 4,299 Current portion of long-term debt and notes payable 91 1,143 Total current liabilities 11,736 12,777 Long-term debt 12,705 11,429 Deferred income taxes 1,321 1,349 Other noncurrent liabilities 1,645 2,767 Total shareholders’ investment 13,997 16,231 Total liabilities and shareholders’ investment $41,404 $44,553
Explanation / Answer
Return on Assets=Net income/total assets Net income after tax=(1636) Total assets=41404 Return on assets=(1636)/41404*100 =(3.95)% Profit margin=NetIncome/Sales*100 =(1636)/72618*100 =(2.25)% Asset Turnover ratio=Sales/total assets*100 =72618/41404 =1.75 times
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