Computing and Interpreting Return on Assets and Its Components Tesco PLC, which is one of the world’s largest retailers and is headquartered in Cheshunt, U.K., reported the following balance sheet and income statement data for 2014 through 2016.

£ millions Total Assets Net Income Sales 201???? . . . . . . . . . . . . . . . ????50,16???? ???? 97???? ????63,557 2015 . . . . . . . . . . . . . . . ????????,21???? (5,7????1) 56,925 2016 . . . . . . . . . . . . . . . ????3,90???? 138 5????,????33 Required

a. What is Tesco’s return on assets for 2015 and 2016?

b. Disaggregate Tesco’s ROA metrics from part a into profit margin and asset turnover.

c. What factor is mainly responsible for the change in Tesco’s ROA over this period?

D1-56. Strategic Financing You and your management team are working to develop the strategic direction of your company for the next three years. One issue you are discussing is how to finance the projected increases in operating assets. Your options are to rely more heavily on operating creditors, borrow the funds, or to sell additional stock in your company. Discuss the pros and cons of each source of financing.
D1-57. Statement Analysis You are evaluating your company’s recent operating performance and are trying to decide on the relative weights you should put on the income statement, the balance sheet, and the statement of cash flows. Discuss the information each of these statements provides and its role in evaluating operating performance.
D1-58. Analyst Relations Your investor relations department reports to you that stockholders and financial analysts evaluate the quality of a company’s financial reports based on their “transparency,” namely, the clarity and completeness of the company’s financial disclosures. Discuss the trade-offs of providing more or less transparent financial reports.
D1-59. Ethics and Governance: Management Communications Many companies publicly describe their performance using terms such as EBITDA or earnings purged of various expenses because they believe these terms more effectively reflect their companies’ performance than GAAP-defined terms such as net income. What ethical issues might arise from the use of such terms, and what challenges does their use present for the governance of a company by stockholders and directors?