Jen and Larry€™s frozen yogurt venture described in Problem 3 required some investment in bricks and mortar. Initial specialty equipment and the renovation of an old warehouse building in lower downtown, referred to as LoDo, cost $450,000 at the beginning of 2010. At the same time, $50,000 was invested in inventories. In early 2011, an additional $100,000 was spent on equipment to support the increased frozen yogurt sales in 2011. Use information from Problem 3 and this problem to solve the following:
A. Calculate the ROA in both 2010 and 2011.
B. Calculate the asset intensity or asset turnover ratios for 2010 and 2011.
C. Apply the ROA model to Jen and Larry€™s frozen yogurt venture.
D. Briefly describe what has occurred between the two years.
E. Show how you would position Jen and Larry€™s frozen yogurt venture in terms of the relationship between net profit margins and asset turnovers depicted inFigure.

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High Case 1 Higher ROA Moderate Case 2 Low Low Moderate High Asset Turnover Ratios