question 7 of 8 the march 29,2012, edition of the wall street journal online contains an article by miguel…

question 7 of 8 the march 29,2012, edition of the wall street journal online contains an article by miguel bustillo entitled \best buy forced to rethink big box\. the article explains how the 1,100 giant stores that enabled best buy to obtain its status as the largest retailer of electronics are now reducing the companys profitability and even threatening its survival. the problem is that many customers go to best buy stores to see items but then buy them for less from online retailers. as a result, best buy recently announced that it would close 50 stores and switch to smaller stores. however, some analysts think that these changes are not big enough. suppose the following data were extracted from the 2027 and 2022 annual reports of best buy. (all amounts are in millions.) 2027 2026 2022 2021 total assets at year - end $18,266 $19,234 $12,630 $10,370 net sales 52,500 32,200 net income 1,260 1,127 using the data above, answer the following questions. (b) compute the profit margin, asset turnover, and return on assets for 2027 and 2022. (round all percentages to 1 decimal place, e.g. 15.1% and asset turnover ratio to 2 decimal places, e.g. 15.21.) 2027 2022 profit margin % % asset turnover times times return on assets % %

question 7 of 8 the march 29,2012, edition of the wall street journal online contains an article by miguel bustillo entitled \best buy forced to rethink big box\. the article explains how the 1,100 giant stores that enabled best buy to obtain its status as the largest retailer of electronics are now reducing the companys profitability and even threatening its survival. the problem is that many customers go to best buy stores to see items but then buy them for less from online retailers. as a result, best buy recently announced that it would close 50 stores and switch to smaller stores. however, some analysts think that these changes are not big enough. suppose the following data were extracted from the 2027 and 2022 annual reports of best buy. (all amounts are in millions.) 2027 2026 2022 2021 total assets at year - end $18,266 $19,234 $12,630 $10,370 net sales 52,500 32,200 net income 1,260 1,127 using the data above, answer the following questions. (b) compute the profit margin, asset turnover, and return on assets for 2027 and 2022. (round all percentages to 1 decimal place, e.g. 15.1% and asset turnover ratio to 2 decimal places, e.g. 15.21.) 2027 2022 profit margin % % asset turnover times times return on assets % %

Answer

Explanation:

Step1: Calculate profit - margin formula

Profit - margin = $\frac{\text{Net Income}}{\text{Net Sales}}\times100%$ For 2027: Profit - margin${2027}=\frac{1260}{52500}\times 100%$ $=\frac{126000}{52500}% = 2.4%$ For 2022: Since net sales data for 2022 is not fully given in the screenshot (only 32200 is shown without specifying if it's for 2022 net sales), assuming it is net sales for 2022, and net income for 2022 is 1127. Profit - margin${2022}=\frac{1127}{32200}\times 100%$ $\approx 3.5%$

Step2: Calculate asset - turnover formula

Asset - turnover = $\frac{\text{Net Sales}}{\text{Average Total Assets}}$ Average total assets for 2027: $\text{Average Total Assets}{2027}=\frac{18266 + 19234}{2}=\frac{37500}{2}=18750$ Asset - turnover${2027}=\frac{52500}{18750}=2.80$ times Average total assets for 2022: $\text{Average Total Assets}{2022}=\frac{12630 + 10370}{2}=\frac{23000}{2}=11500$ Asset - turnover${2022}=\frac{32200}{11500}=2.80$ times

Step3: Calculate return on assets formula

Return on assets = $\frac{\text{Net Income}}{\text{Average Total Assets}}\times100%$ For 2027: Return on assets${2027}=\frac{1260}{18750}\times 100%$ $=\frac{126000}{18750}%=6.7%$ For 2022: Return on assets${2022}=\frac{1127}{11500}\times 100%$ $\approx 9.8%$

Answer:

2027 2022
Profit Margin 2.4% 3.5%
Asset Turnover 2.80 times 2.80 times
Return on Assets 6.7% 9.8%