Exercise 13-10 Suppose selected comparative statement data for the giant booksel

Question

Exercise 13-10 Suppose selected 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) 2017 2016 $5,150 $4,900 3,801 4,101 Net sales Cost of goods sold Net income Accounts receivable Inventory Total assets Total common stockholders' equity 103 1,250 1,250 2,850 3,250 900 1,060 65 Compute the following ratios for 2017, (Round asset turnover to 2 decimal places, e.g 1.83 and all other answers to 1 decimal place, eg. 1.8 or 2.5%) (a) Profit margin (b) Asset turnover (c) Return on assets (d) Return on common stockholders' equity (e) Gross profit rate times

Explanation / Answer

the following is the required table along with a column for workings: (all answers are rounded to two decimals).

note:

average total assets = (2850 +3250)/ 2

=>3,050.

average stock holders equity = (900 + 1060) / 2

=>980.

workings a.profit margin 1.07% (net income / net sales)*100=>(55/5150)*100=>1.07% b.Asset turnover 1.69times (net sales / average total assets) (see note) =>(5,150 / 3050) =>1.69 c.Return on assets 1.80% (net income / average total assets) =>(55 / 3050)*100=>1.80% d.return on common stock holder's equty 5.61% (net income / average stock holders equity) (see note) (55 / 980)*100=>5.61% e.Gross profit rate 26.19% (net sales - cost of goods sold) / net sales *100=>(5150- 3801)/ 5150*100=>26.19%

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