Below is financial information for two restaurant retailers. Popper's Company operates an innovative retail bakery-cafe business and

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Below is financial information for two restaurant retailers. Popper's Company operates an innovative retail bakery-cafe business and franchising business. At the end 2010, Popper's had 132 company-owned and 346 franchise-operated bakery-cafes. Popper's located most of their unique bakery-cafe concept stores in suburban, strip mall, and regional mall locations. As a first mover in this concept, the company operates in 32 states. Simmer Corporation began operations five years earlier than Popper's and purchases and roasts whole bean coffees and sells them, along with numerous coffee drinks and related products at over 2,900 Company-operated retail stores.
Selected Data for Popper's Company and Simmer Corporation
(amounts
in millions)
Simmer Popper's $4,076 Sales $278 Cost of Goods Sold 1,686 97 Interest Expense 268 Net Income 22 Average Inventory 303 4

Required:
a. Compute the rate of return on assets for each firm. Disaggregate the rate of return on assets into profit margin and assets turnover components. The income tax rate is 35%.
b. Describe the likely reasons for the differences in the profit margins and assets turnovers of the two companies.

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Related Book For  book-img-for-question

Intermediate Accounting principles and analysis

ISBN: 978-0471737933

2nd Edition

Authors: Terry d. Warfield, jerry j. weygandt, Donald e. kieso

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