1243013618_Chap006(2) - 6-1Return on AssetsNet Profit...

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Unformatted text preview: 6-1Return on AssetsNet Profit Margin x Asset Turnover = Return on AssetsMacy’s:3.70% x 0.95 = 3.37%Costco: 1.80% x 3.44 = 6.19%Return on Assets is a very important performance measure because it shows how much money the retailer is making on its investment6-2Evaluation of Financial Path:Macy’s and CostcoMacy’sCostcoHigher net profit marginHigher asset turnover■Retailers (and investors) need to consider both net profit margin and asset turnover when evaluating their financial performancethe implications of strategic decisions on both components of the strategic fit model•EX: Increasing prices => gross margin, net profit marginsales, asset turnover 6-3Strategic Profit Model Ratios for Selected Retailers6-4Income Statement for Gifts to Go6-5Profit Margin Management Path:Gross Margin PercentGross Margin= Gross Margin PercentNet SalesStores: $350,000= 50%$700,000Gifts-to-Go.com $220,000= 50%$440,0006-6Operating Expense PercentOperating Expenses= Operating Expenses %Net SalesStores: $250,000= 35.7%$700,000GiftstoGo.com$150,000= 34.1%$440,0006-7Net Profit PercentageNet Profit= Net Profit PercentageNet SalesStores: $ 59,800= 8.5%$700,000 Gifts-to-Go.com: $ 45,500= 10.3%$440,000 6-8Balance Sheet Information for Gifts to Go and Proposed Internet Channel6-9Asset Turnover Management Path:Inventory TurnoverCost of Goods= Inventory TurnoverAverage InventoryStores: $350,000= 2.0$175,000Gifts-to-Go.com: $220,000= 3.1$70,0006-10Asset TurnoverNet Sales= Asset TurnoverTotal AssetsStores: $700,000= 1.84$380,000Gifts-to-Go.com: $440,000= 2.09$211,0006-11Return on AssetsNet Profit Margin x Asset Turnover = Return on AssetsStores: 8.54 x 1.84 = 15.7%Gifts-to-Go.com 10.3 x 2.09 = 21.3%6-12Profit ManagementAsset ManagementThe Strategic Profit ModelNet SalesCost of goods soldVariable expensesFixed expensesGross marginTotal expensesNet profitNet SalesNet profit marginAsset turnoverReturn on assets÷--+InventoryAccounts receivableOther current assetsTotal current assetsFixed assetsNet salesTotal assets+++÷x6-13Setting and Measuring Performance Objectives...
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This note was uploaded on 01/09/2010 for the course MKT 4324 taught by Professor Trappey during the Spring '09 term at National Taiwan University.

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1243013618_Chap006(2) - 6-1Return on AssetsNet Profit...

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