Bob Evans Farms, Inc. operates 714 restaurants in 31 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 2009, the company wrote off $68.0 million of goodwill and reported a net loss of $5.1 million. Since no similar write-offs occurred in 2007 or 2008, we are using income before the write-off as net income.
Instructions

(a) Compute the percentage change in sales and in net income from 2007 to 2009.

(b) What contribution, if any, did the company’s gross profit rate make to the change in earnings from 2007 to 2009?

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

(d) The chief executive officer’s letter stated that the company slowed its expansion, opening 1 new restaurant in 2009 and 2 in 2008, compared to 10 openings in 2007. What effect would you expect this change, along with the write-off of goodwill in 2009, to have on return on assets? Calculate the company’s return on assets for 2008 and 2009 to support your answer.
FINANCIAL ANALYSIS ON THE WEB

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2009 2008 2007 Sales $1,750.5 $1,737.0 $1,654.5 Cost of goods sold 537.1 517.4 482.1 Net income 62.9* 64.9 60.5 Total assets 1,147.6 1,207.0 1,197.9