Analyzing and Evaluating Return on Assets from a Security Analyst's Perspective
Papa John's is one of the fastest-growing pizza delivery and carry-out restaurant chains in the country. Presented here are selected income statement and balance sheet amounts (dollars in thousands).
| Current Year | Prior Year |
Net sales | $1,132,087 | $1,063,595 |
Net income | 36,796 | 32,735 |
Average shareholders’ equity | 128,445 | 136,536 |
Average total assets | 394,143 | 390,728 |
Required:
1. Compute ROA for the current and prior years and explain the meaning of the change.
2. Would security analysts more likely increase or decrease their estimates of share value on the basis of this change? Explain.
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