Question

Help solve for asset turnover, return on common stockholders equity, and gross profit rate ratios. Thank you

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). Net sales Cost of goods sold Net income Accounts receivable Inventory Total assets Total common stockholders' equity 2019 $4,950 3,501 75 65 1,150 2,950 971 2018 $5,701 3,801 171 103 1,350 3,250 1,141 Compute the following ratios for 2019. (Round asset turnover to 2 decimal places, e.g 1.83 and all other answers to 1 decimal place, e.g. 1.8 or 2.5%) (a) Profit margin 1.5 % (b) Asset turnover (c) Return on assets 2.5 (d) Return on common stockholders' equity (e) Gross profit rate

Answer 1

6) Asset Turnover (d) Return on common stockholders' equity (e) Gross Profit rate 1.60 Times 7.1 % 29.3% Working Notes: (b) Asset Turnover = Net Sales / Average Total Assets Average Total Assets = (Opening total assets + Closing total assets)/2 = ($3,250+$2.950)/2 = $3,100 Asset Turnover = $4.950/53.100 = 1.60 Times (d) Return on Common stockholders equity =Net Income / Average Common stockholders' equity Average Common stockholders' Equity = Opening Common stockholders equity + Closing common stockholders equity)/2 = ($1,141+$971)/2 = $1,056 Return on Common stockholders equity = $75/$1,056 = 7.1% (e) Gross profit rate = Gross Profit / Net sales Gross Profit = Net Sales - Cost of Goods Sold = $4,950-$3,501 = $1,449 Gross Profit rate = $1,449/$4,950 = 29.3%