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118-SS'08A-FINAL EXAM-KROGER-KEY

118-SS'08A-FINAL EXAM-KROGER-KEY - Econ 118Financial...

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Econ 118-SS’08(A)-FINAL EXAM KEY - p1 Econ 118–Financial Statement Analysis–SS’08(A) Final Exam – 100 points ANSWER KEY All questions (except # 5) are based on the annual report of The Kroger Co. Kroger is a major nationwide chain of food and other retail stores. The questions that follow are based on selected pages from Kroger’s 2007 (fiscal year ended February 2, 2008) annual report, which are attached. Use year-end numbers where a formula calls for an average. The U.S. federal statutory tax rate was 35% for all periods. Show all your work. Clearly label all answers. Watch your pluses and minuses! Hint: Don’t look too hard: there are no special items, minority interests, nor preferred dividends or equity. Question 1 – Return on assets (25 points) Compute return on assets for 2007 and 2006. Disaggregate ROA into its two components. ROA NI + (1 - t) Int exp ROA = __________________________________ Year-end (vs average) total assets 2007 ROA = 1,181 + (1 - .35) 474 1,489 ________________________________ = _______ = 6.677% 22,299 22,299 2006 ROA = 1,115 + (1 - .35) 488 1,432 ________________________________ = _______ = 6.750%
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