Based on your knowledge of the three retail stores and their respective industry concentrations, describe the likely reasons for the differences in the profit margins for ROA and assets turnovers?

Macy’s

Profit Margin for ROA= $(4803) million + $382.2 million    = (17.7)%

                                                 $24,892 million 

Asset Turnover = $ 24,892 million   = 1.00

                             $ 24,967 million    

ROA = (17.7)% x 1.00  = (17.7)%

Home Depot

Profit Margin for ROA = $ 2,260 million + 405.6 million  = 3.7%

                                                      $71,288 million

Asset Turnover = $ 71,288 million    = 1.67

                              $ 42,774 million

ROA= 3.7% x 1.67 = 6.2%

Supervalu

Profit Margin ROA = $ (2,855) million +411.45 million  = (5.5)%

                                                  $ 44,564 million

Asset Turnover =  $44,564 million  = 2.31

                              $ 19,333 million

ROA= (5.5)% x 2.31 =(12.6)%

Transcribed Image Text:

Sales Cost of goods sold Interest expense Net income Average inventory Average fixed assets Average total assets Exhibit 4.22 Selected Data for Three Retailers (amounts in millions) (Problem 4.15) Macy's $24,892 15,009 588 (4,803) 4,915 10,717 24,967 Home Depot $71,288 47,298 624 2,260 11,202 26,855 42,744 Supervalu $44,564 34,451 633 (2,855) 2,743 7,531 19,333 Sales Cost of goods sold Interest expense Net income Average inventory Average fixed assets Average total assets Exhibit 4.22 Selected Data for Three Retailers (amounts in millions) (Problem 4.15) Macy's $24,892 15,009 588 (4,803) 4,915 10,717 24,967 Home Depot $71,288 47,298 624 2,260 11,202 26,855 42,744 Supervalu $44,564 34,451 633 (2,855) 2,743 7,531 19,333

Answer rating: 100% (QA)

SOLUTION Based on the provided data for Macys Home Depot and Supervalu the differences in profit margins for return on assets ROA and assets turnover can likely be attributed to the following factors ... View the full answer