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Comparing Ratios for Luxury and Budget Retailers Following are selected financial statement data from Capri Holdings (a retailer that owns upscale brands Michael Kors, Jimmy Choo, and Versace) and Five Below (a value-priced toy and novelty retailer). Capri Holdings Five Below (5 millions) is thousands) 2018 2017 2018 2017 Sales $4,435.5 54.224.1 $1,465,989 $1,201,516 Cost of sales 1,803.5 1,777.3 964,644 790,351 Net income 574.3 535.0 145.156 99,377 Average equity 1,696.7 1.686.4 504,616 371,283 Required a. Calculate the gross profit for each company for both years. Gross profit is equal to sales minus the cost of sales. b. Calculate gross profit as a percentage of sales for each company for both years. C. Campute the return on equity for each company for both years. Notes: For gross profit, enter Capri Holdings in millions and Five Below in thousands. Round gross profit percentage and ROE to one decimal place (example: 0.2345 = 23.5%). Capri Holaings Five Below 2018 2017 2018 2017 a. Gross profit $ 0$ 0$ 05 0 b. Gross profit percentage 0 046 0 % 09 c. Return on equity (ROE) 0 % 09 0 % 096 d. Which of the following best explains why the ratios for Five Below and Capri Holdings differ? Select the corresponding number for the correct answer: 1. Capri Holdings is much larger than Five Below and so its ratios are naturally larger. 2. Five Below is a younger company and so its ratios are naturally lower. 3. Capri Holdings' brand recognition creates a competitive advantage, which allows the company to add a bigger markup to the products it sells. 4. Five Below imports its products from Southeast Asia, which allows the company to keep product costs down. Computing Return on Equity and Return on Assets The following table contains financial statement information for Walmart Inc. $ millions Total assets Net Income Sales Equity 2018 $247,803 58,137 $408,263 $81.920 2017 231,110 396,609 87,992 2016 224,672 16,644 385,054 87,912 a. Compute return on equity (ROE) for the two recent years. b. Compute return on assets (ROA) for the two recent years. c. Compute profit margin (PM) for the two recent years. d. Compute asset turnover (AT) for the two recent years. Round ROE, ROA and PM to one decimal place (example: 0.2345 = 23.5%). Round AT to two decimal places (example: 1.35). 2018 ROE ROA 0 PM 0 % 096 AT 0 0 e. Which of the following best explains the change in ROA during 2018? The company's profitability weakened considerably. OThe company's asset productivity weakened considerably. OThe company had higher sales in 2018. OThe company had higher assets 2018. Formulating Financial Statements from Raw Data and Calculating Following is selected financial information from JM Smucker Co. for the year ended April 30, 2018 ($ millions). Current assets, end of year $1,399.5 Long-term liabilities, end of year $5,738.7 Cash, end of year 173.3 Stockholders' equity, end of year 7,102.0 Cash from Investing activities (249.8) Cash from operating activities 1,096.2 Cost of products sold 4,068.9 Total assets, beginning of year 14,075.7 Total liabilities, end of year 6,669.1 Revenue 6,621.4 Cash from financing activities (823.1) Total expenses, other than cost of 1,347.8 Stockholders' equity, beginning of year 6,165.2 product sold Dividends paid 3153 * Cash from financing activities includes the effects of foreign exchange rate fluctuations. a. Prepare the income statement for the year ended April 30, 2018, Note: Do not use negative signs with any of your answers. Subscker to Tricome Statements millions) the year ended April 30, 2018 Revenues $ 0 Cost of product sold 0 Gross profit Expenses 0 Net income $ 0 0 0 b. Prepare the balance sheet as of April 30, 2018. TNI Smieker to Balance sheet millibris Apr 30, 2018 Current assets $ 0 Current liabilities 15 Long-term assets 0 Leng-term liabilities Total liabilities Stockholders equity Total assets $ 0 Total liabilities and equitys 0 0 0 c. Prepare the statement of cash flows for the year ended April 30, 2018 Note: Use a negative sign with your answer to indicate cash was used by activities and/or a decrease in ca JM Smucker Co Statement of Cash Flava (Sinions) For the year ended April 2018 Cash from operating activities 0 Cash from investing activities Cash from financing activities 0 Net increase (decrease) in cash Cash, beginning of year 0 Cash, end of year $ D 0 0 d. Compute ROA. e. Compute profit margin (PM). f. Compute asset turnover (AT). g. Compute ROE. Notes: Round ROA, PM, and ROE to one decimal place (ex: 10.5%). Round AT (asset turnover) to two decimal places (0.33). ROA 0 % 0 % PM . 0 ROE Applying the Accounting Equation and Assessing Financial Statement Linkages The following information is available for Advanced Micro Devices (AMD) and Intel for the current year. AMD's assets increased by $803 million and its liabilities increased by $267 million. Intel's assets increased by $3,771 million and its liabilities decreased by $664 million. a. Complete the following table. Stockholders ASSOS ASSES abs Liabilities equity Smillions Begiofrend of year or end of ytan End of year Advanced Micro Devices $ 0 $3,645 $2,365 S 0$ 0 Intel $98,599 $ 0$ 0 $42,720 $ 0 b. Calculate average assets for each company. Round your answers to the nearest million, if applicable. 5 millions Assets Advanced Micra Devices $ 0 Intel $ 0 c. Which company has the larger proportion of its assets financed by the company's owners at year-end? Understanding What Information Financial Statement Users Demand Match each of the financial statement users listed to the question they are most likely to ask. Questions Financial Statement User 1. What is the expected net income for next quarter? 2. Will the company have enough cash to pay dividends? 3. Has the company paid for inventory purchases promptly in the past? 4. Will there be sufficient profits and cash flow to pay bonuses? Banker 5. Will the company have enough cash to repay its loans? Company CEO Check Current shareholders Equity analyst Supplier Applying the Accounting Equation and Computing Financing Proportions Use the accounting equation to compute the missing financial amounts. ($ millions) Assets Liabilities Equity Hewlett-Packard $108,768 $85,935 General Mills $22,658 $8,096 Target $31,605 $16,558 $ 0 $ $ 0 Which of these companies is more owner-financed? O Hewlett-Packard O General Mills Target Which of these companies is more nonowner-financed? General Mills Hewlett-Packard Target