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Item $11$

Problem $7-9$A $($Algo$)$ Calculate and interpret ratios $($LO$7-7)$

Sub Station and Planet Sub reported the following selected financial data. Sub Station$$s business strategy is to sell the best$-$tasting sandwich with the highest$-$quality ingredients. Planet Sub$$s business strategy is to sell the lowest$-$cost sub on the planet.

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$$Sub StationPlanet SubNet sales$$109,449$$$63,271$Net income$27,1224,692$Total assets, beginning$76,38340,799$Total assets, ending$118,77146,933$

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Required:

$1.$ Calculate Sub Station$$s return on assets, profit margin, and asset turnover ratio.

$2.$ Calculate Planet Sub's return on assets, profit margin, and asset turnover ratio.

$3-$a$.$ Which company has the more favorable profit margin?

$3-$b$.$ Which company has the more favorable asset turnover?

$3-$c$.$ Are the two ratios consistent with the primary business strategies of the two companies?