You are a financial analyst. A prospective client wants to invest her hard-earned money in Macys stock
Question:
You are a financial analyst. A prospective client wants to invest her hard-earned money in Macy’s stock and requests you assist in her investment decision. Your commission is projected to be 15% of the multi-million-dollar investment. You performed your due diligence on Macy’s Return on Assets profitability ratio over the FY 2019, 2018, and 2017 fiscal years. Your reputation as a must-have financial analyst is on the line based on the success of your recommendation.
a. Calculate the Return on Asset ratios for FY 2019, 2018, and 2017. Show your calculations for full score. (Note: This ratio is expressed in %.)
FY 2019
Net Profit
Avg. Total Assets
Total Asset Turnover
FY 2018
Net Profit
Avg. Total Assets
Total Asset Turnover
FY 2017
Net Profit
Avg. Total Assets
Total Asset Turnover
b. The prospective client wants you to explain what information is been communicated by the Return on Assets ratio. Explain, and based on the trend would you recommend Macy’s stock as an investment opportunity to the prospective client? Why?
Expert Answer:
ROA 2017 793 ROA 2018 566 ROA 2019 279 Based on the trend of the ROA the investor should not invest ... View the full answer
