Assessing how well a company's strategy is presently working involves evaluating the strategy from both a qualitative standpoint and from a quantitative standpoint. The stronger a company's current overall performance, the less likely the need for radical strategy changes. The weaker a company's performance, the more its current strategy must be questioned. The financial ratios provided in the Appendix are the most commonly used to evaluate a company's financial performance and balance sheet strength. Assurance of Learning Exercise 4.1 provides you with an opportunity to assess Macy's, Inc., financial performance and balance sheet strength. This exercise requires the same calculations and overall assessment. Before completing this exercise, be sure to read Chapter 4 Evaluating a company's Resources. Capabilities and Competitiveness as well as reviewing the Appendic Key Financial Ratios: How to Calculate them and What They Mean. Using the financial ratios provided in the Appendix and the financial statement information for Macy's, Inc below, calculate the following ratios for Macy's for both 2018 and 2019: a. Gross profit margin b. Operating profit margin c. Net profit margin d. Times interest earned coverage. e Return on shareholders' equity. Return on assets 9. Debt-to-equity ratio. h Days of inventory. L. Inventory turnover ratio. Average collection period. Consolidated Statements of income for Macy's Inc. Feb. 03. 2018-Feb. 02, 2019 fin millions, except per share data) 2019 2018 Net sales $24.971 $24.939 Credit Card Revenues, Net 768 702 Cost of Sales (15,215) (15,181) Selling. General, and Administrative Expenses 19.039) (8954) Gains on Sale of Real Estate 544 Restructuring. Impairment Store Closing, and other Costs Operating Income/LOSS Benefit Plan Income Settlement Charges interest Expense 136 1738 39 (88) (261) (186) 1864 57 (105) (321) Gains (Losses) on Early Retirement of Debt Interest Income Income foss) before Income Taxes Federal, State, and Local Income Tax Benefit Expense) Net Income (LOSS Net Loss Attributed to Noncontrolling Interest Net Income Attributed to Macy's, Inc. Shareholders Basic Earnings per Share Attributable to Macy's, Inc. Shareholders Diluted Earnings per Share Attributable to Macy's, Inc. Shareholders (33) 25 1,420 (322) 1,098 10 3108 10 11 1516 39 1555 11 $1566 $5.13 $3.60 $3.56 $5.10 Consolidated Balance Sheets for Macy's Inc., Feb 03, 2018-Feb. 02, 2019 in milions, except per share data) ASSETS February 2, 2019 February 2, 2018 Current Assets Cash and Cash Equivalents 3362 51445 Receivables 400 Current Assets Cash and Cash Equivalents Receivables Merchandise Inventories Prepaid Expenses and Other Current Assets Total Current Assets Property and Equipment-Net Goodwill Other intangible Assets-Net Other Assets Total Assets 17 $15162 400 5,263 620 57,445 6,637 3.908 478 726 19,194 $1.445 363 55178 650 $7.646 6,672 3,897 488 880 19,583 $43 1,655 3,366 168 5.232 4.708 1.238 1.580 $22 1.590 3,271 296 5,179 5,861 1,148 1662 LIABILITIES AND SHAREHOLDER EQUITY Current Liabilities Short-Term Debt Merchandise Accounts Payable Accounts Payable and Accrued Liabilities Income Taxes Total Current Liabilities Long-Term Debt Deferred Income Taxes Other Liabilities Shareholders' Equity Common Stock (3075 and 304.8 shares outstanding) Additional Paid in Capital Accumulated Equity Treasury Stock Accumulated Other Comprehensive Loss Total Macy's Inc. Shareholders' Equity Noncontrolling interest Total Shareholder Equity Total Liabilities and Shareholder Equity Source: Macy's, Inc., 2018 10-K. 3 652 8,050 (1,318) 1951) 6,436 g $6,436 $19,194 3 676 7.246 (1.456) (724) 5,745 (12) 35.733 $19,583 Note: Developed with Meredith Peabody Using the formulas in the Appendix and Macy's, Inc., financial statement below, calculate the following measures of financial performance. Be sure to report items (a) through (e) in percentages (.e., multiply your result x 100) a. Gross profit margin b. Operating profit margin c Net profit margin d. Return on shareholders' equity e. Return on assets. 1. Times-interest-earned for coverage ratio 9. Debt-to-equity ratio. h. Days of inventory L Inventory turnover ratio J. Average collection period. 2019 2018 Ratios a. Gross profit margin (25) b. Operating profit margin (25) c. Net profit margin (%) Return on shareholders d. equity (2) Reference Treasury Stock Accumulated Other Comprehensive Loss Total Macy's Inc. Shareholders' Equity Noncontrolling Interest Total Shareholder Equity Total Liabilities and Shareholder Equity Source: Macy's, Inc., 2018 10-K. Note: Developed with Meredith Peabody (1,318) (951) 6,436 0 $6,436 $19,194 (1.456) (724) 5,745 (12) $5,733 $19,583 Using the formulas in the Appendix and Macy's, Inc., financial statement below, calculate the following measures of financial performance. Be sure to report items (a) through (e) in percentages (ie, multiply your result x 100) a. Gross profit margin b. Operating profit margin c. Net profit margin. d. Return on shareholders' equity e. Return on assets. f. Times-interest-earned (or coverage) ratio. 9. Debt-to-equity ratio. h. Days of inventory i. Inventory turnover ratio. J. Average collection period 2019 2018 Ratios a. Gross profit margin (%) b. Operating profit margin (%) C. Net profit margin (%) d. Return on shareholders' equity (%) e. Return on assets (%) Times interest earned 1. coverage 9. Debt-to-Equity Ratio h. Days of Inventory I. Inventory Turnover Ratio J. Average collection period