Question

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). 2020 2019 Net sales $5,400 $4,900 Cost of goods sold 3,294 3,492 Net income 70 138 Accounts receivable 87 112 Inventory 1,181 1,349 Total assets 3,000 3,750 Total common stockholders’ equity 913 1,084 Compute the following ratios for 2020. (Round asset turnover to 2 decimal places, e.g. 1.67. Round all other answers to 1 decimal place, e.g. 1.6 or 1.6%.) (a) Profit margin % (b) Asset turnover times (c) Return on assets % (d) Return on common stockholders’ equity % (ea) Gross profit rate % Click if you would like to Show Work for this question: Open Show Work

Answer 1

A Solution 1 Ratios (in millions) Ratio Formula 2020 a. Profit Margin Ratio Net Income / Net Sales $70 Net Income Net Sales $5,400 Profit Margin Ratio $70 / $5400 *100 = 1.3% HMS 4 b. Asset Turnover Ratio Net Sales /Average Total Assets Net Sales Average Total Assets $5,400 ($3000+$3750)/2 = $ 3375 Asset Turnover Ratio $5400 / $3375 = 1.6 999 Hmst in D c. The return on assets Net Income /Average Total Assets Net Income Average Total Assets $70 ($3000+$3750)/2 = $ 3375 Return on assets Ratio $70 / $3375 *100 = 2.1%

30 31 d.Return on common stockholders Equity Net Income /Average common Stockholders' Equity 33 $70 34 Net Income Average common Stockholders' Equity ($913 + $1084)/2 = $ 998.5 Return on common stockholders Equity $70 / $998.5 *100 = 7% 39 40 41 e. Gross Profit Rate Gross Profit/Total Sales 43 Gross Profit (W Note 1) Total Sales $2,106 $5,400 46 Gross Profit Rate $ 2106/$5400 * 100= 39% 49 W Note 1 :- Calculation of Gross Profit :- 50 Year 51 Net Sales 52 Less: Cost of goods sold 53 Gross Profit 54 2020 $5,400 ($3,294) $2,106