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corp fin - nature of many of its products The rapid...

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Ryan Dorbandt 897151275 4.6 ROA = (NI + after-tax int exp x minor int. earnings)/ avg TA ROA = [1,121 + (.65*29)]/[(4492 + 6,133)/2] ROA =.21.2% PM = 1,121 + (.65*29)]/11,377 PM = 10% AT = 11,377/.4(4,4942 + 6,133) AT = 2.14 4.11 Albertson’s: ROA = $474+(1.0-.35)($493)/ $16, 989 ROA = 4.7% Profit Margin for ROA $474+(1.0-.35)($493)/$39, 897 PM = 2.0% Assets Turnover $39, 897/ $16, 989 AT = 2.35 Home Depoit: ROA = 5,001 + (.65)(70)/40,432 ROA = 12.5% PM = 5,001 = (.65)(70)/ 73,094 PM = 6.9% AT = 73,094/40,432 AT = 1.81 Federated Department Stores: ROA = 689 + (.65)(299)/ 14,718 ROA = 6% PM = 689 + (.65)(299)/ 15,630 PM = 5.7% AT =15,630/14,718 AT = 1.06 There is a lot of competition in the grocery products business. So, we would expect it to have the lowest profit margin for ROA. Albertson’s has the highest assets turnover, the result of a rapid inventory turnover and relatively low investment in fixed assets compared to Federated. Albertson’s rapid inventory turnover results from the perishable
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Unformatted text preview: nature of many of its products. The rapid inventory turnover increases sales and thereby the fixed asset turnover. Home Depot has the next highest profit margin for ROA and the next lowest assets turnover. We can expect Federated Department Stores to have the highest profit margin, given its name brand apparel and other upscale products. Federated does have the lowest cost of goods sold to sales percentage, consistent with its greater ability to mark up selling prices over cost. Federated has the second highest profit margin and the slowest assets turnover of the three companies. Its product line is less commodity than Albertson’s or Home Depot. The greater use of sales personnel in stores increases its selling expenses. Its inventory turnover is the lowest of the three companies because it uses low prices less as a strategy. Therefore its total asset turnover is the lowest of the three companies....
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