Bakely Company reports the following information (in millions) during a recent year: net sales, $11,408.5; net earnings, $264.8; total assets, ending, $4,312.6; and total assets, beginning, $4,254.3.
Instructions
(a) Calculate the (1) return on assets, (2) asset turnover, and (3) profit margin.
(b) Prove mathematically how the profit margin and asset turnover work together to explain return on assets, by showing the appropriate calculation.
(c) Bakely Company owns Villas (grocery), Bakely Theaters, Kurt Drugstores, and Derosa (heavy equipment), and manages commercial real estate, among other activities. Does this diversity of activities affect your ability to interpret the ratios you calculated in (a)? Explain.