Linley Company reports the following information (in millions) during a recent year: net sales, $11,408.5; net earnings,

Question:

Linley 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) Linley Company owns Northgate (grocery), Linley Theaters, Oz Drugstores, and Ransome (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.

Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Accounting Tools for Business Decision Making

ISBN: 978-1118096895

6th edition

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso

Question Posted: