In response to complaints about high prices, a grocery chain runs the following

Question

In response to complaints about high prices, a grocery chain runs the following advertising campaign: “If you pay your child $9 to go buy $100 worth of groceries, then your child makes twice as much on the trip as we do.” You’ve collected the following information from the grocery chain’s financial statements: (millions) Sales $ 560.0 Net income 25.2 Total assets 460.0 Total debt 330.0 What is the profit margin for child as a percentage of what they spend and the profit margin for the store? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Profit margin Child % Store % What is the store's ROE? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) ROE % rev: 02_03_2016_QC_CS-40299

In response to complaints about high prices, a grocery chain runs the following advertising campaign: "if you pay your child $9 to go buy $100 worth of groceries, then your child makes twice as much on the trip as we do." You've collected the following information from the grocery chain's financial statements: (millions) Sales Net income Total assets Total debt $560.0 25.2 460.0 330.0 What is the profit margin for child as a percentage of what they spend and the profit margin for the store? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Profit margin Child Store What is the store's ROE? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) ROE

Explanation / Answer

Answer )

Profit Margin = Net Income / Total Sales

For Child profit margin = 9 / 100 = 9% (9 is the net income for child on buying groceries worth 100 i.e sales)

For Store = 25.2 / 560 = 4.5%

ROE of store = Net Income / Total equity

Total assets = Total debt + Total equity

Total equity = Total assets -Total Debt = 460-330 = 130

ROE of store = 25.2 / 130 =19.38%

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