Question
Below are excerpts from the 2020 financial statements of two companies selling workout apparel: Nike, Inc. (NK) and Lululemon Athletica, Inc. (LULU) NK LULU Sales
Below are excerpts from the 2020 financial statements of two companies selling workout apparel: Nike, Inc. (NK) and Lululemon Athletica, Inc. (LULU)
NK | LULU | |
Sales | $37,403,000 | $3,979,396 |
Earnings Available for Common Shareholders | $2,539,000 | $645,596 |
Total Assets | $31,342,000 | $3,281,354 |
Total Equity | $8,055,000 | $1,952,218 |
Using the DuPont analysis, calculate the component ratios for ROA and ROE for Nike and Lululemon. What statement best describes the differences in ROA and ROE for Nike and Lululemon?
a. LULU has a higher Net Profit Margin and lower Total Asset Turnover therefore its ROA is lower than NK. While NKs Financial Leverage Multiplier is smaller, LULUs ROE is higher than NK.
b .LULU has a lower Net Profit Margin and Total Asset Turnover therefore its ROA is lower than NK. While NKs Financial Leverage Multiplier is smaller, LULUs ROE is lower than NK.
c. LULU has a lower Net Profit Margin and higher Total Asset Turnover therefore its ROA is lower than NK. While NKs Financial Leverage Multiplier is larger, LULUs ROE is higher than NK.
d. LULU has a higher Net Profit Margin and Total Asset Turnover therefore its ROA is higher than NK. While NKs Financial Leverage Multiplier is larger, LULUs ROE is higher than NK.
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