The March 29, 2012, edition of the Wall Street Journal Online contains an article Eby Miguel Bustillo entitled, “Best Buy Forced to Rethink Big Box.” The article explains how the 1,100 giant stores, which enabled Best Buy to obtain its position as the largest retailer of electronics, are now reducing the company’s profitability and even threatening its survival. The problem is that many customers go to Best Buy stores to see items but then buy them for less from online retailers. As a result, Best Buy recently announced that it would close 50 stores and switch to smaller stores. However, some analysts think that these changes are not big enough.

Suppose the following data were extracted from the 2017 and 2012 annual reports of .

Best Buy. (All amounts are in millions.)

Instructions Using the data above, answer the following questions.

(a) How might the return on assets and asset turnover of Best Buy differ from an online retailer?

(b) Compute the profit margin, asset turnover, and return on assets for 2017 and 2012.

(c) Present the ratios calculated in part

(b) in the equation format shown in Illustration 9-22 (page 446).

(d) Discuss the implications of the ratios calculated in parts

(b) and (c).

Transcribed Image Text:

2017 2016 2012 2011 Total assets at year-end Net sales Net income $17,849 $18,302 $11,864 $10,294 50,272 1,277 30,848 1,140