Evaluating Profitability and Liquidity
A recent annual report issued by Best Buy revealed the following data:
| End of Year | Beginning of Year |
Current assets | $8.2 billion | $7.3 billion |
Current liabilities | $8.4 billion | $6.8 billion |
Stockholders' equity | $4.6 billion | $4.5 billion |
The company's income statement reported total annual revenue of $45.0 billion and net income for the year of $1.0 billion.
Instructions
a. Evaluate Best Buy's profitability by computing its net income percentage and its return on equity for the year.
b. Evaluate Best Buy's liquidity by computing its working capital and its current ratio at the beginning of the year and at the end of the year.
c. Does Best Buy appear to be both profitable and liquid? Explain.
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