Bob Evans Farms, Inc., operates 315 restaurants in 19 states and produces fresh and fully cooked sausage products, fresh salads, and related products distributed to grocery stores in the Midwest, Southwest, and Southeast. For a recent 3-year period Bob Evans Farms reported the following selected income statement data (in millions of dollars):

In his letters to stockholders, the chief executive officer (CEO) expressed great enthusiasm for the company’s future. Here is an excerpt from that letter:
Bob Evans Farms is uniquely positioned as a trusted brand name in both the restaurant and grocery store sectors, providing us with numerous growth opportunities.
Our principal long-term goal is to capitalize on that potential for the benefit of our stockholders.
Instructions

(a) Compute the percentage change in sales and in net income from 1997 to 1999.

(b) What contribution, if any, did the company's gross profit rate make to the improved earnings?

(c) Compute the ratio of operating expenses to sales for each of the 3 years. Comment on any trend in this percentage.

(d) What was Bob Evans’ profit margin ratio in each of the 3 years? Comment on any trend in this percentage.

(e) The CEO’s letter also stated that the company’s “same-store sales” have increased by 5% in each of the last 2 years. What effect would you expect this change to have on return on assets? Calculate the company’s return on assets for 1998 and 1999 to see if it reflects the increase in same-store. sales.

(f) Based on the trends in these ratios, does the CEO’s optimism seem appropriate?
A GLOBAL FOCUS

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1999 1998 1997 Sales $968.5 $886.8 $822.2 Cost of goods sold 275.9 271.4 265.5 Selling and administrative expenses 566.5 509.3 470.4 Net income 57.6 45.7 36.1 Total assets 590.4 579.9 564.1