Comparing Profitability and Turnover Ratios for Retail Companies

Selected financial statement data for Best Buy Co., Inc., The Kroger Co., Nordstrom, Inc., Staples, Inc., and Walgreen Co. is presented in the following table:

($ millions)	Best Buy	Kroger	Nordstrom	Staples	Walgreen
Sales revenue	$40,339	$108,465	$13,506	$22,492	$76,392
Cost of sales	31,292	85,512	8,406	16,691	54,823
Interest expense	90	488	138	49	156
Net income	1,233	1,728	720	135	1,932
Average receivables	1,294	1,191	2,489	1,883	2,925
Average inventories	5,275	5,670	1,632	2,236	6,464
Average PP&E	2,447	17,403	3,145	1,788	12,198
Average total assets	14,635	29,919	8,910	10,744	36,332

Note: Assume a statutory tax rate of 35% for all companies.

Required a. Compute return on assets (ROA) profit margin, (PM) and asset turnover (AT) for each company. Assume a statutory tax rate of 35%.

Round your answers to one decimal place.

	Best Buy		Kroger		Nordstrom		Staples		Walgreen
ROA	8.4	%	5.8	%	8.1	%	1.3	%	5.3	%
PM	3.1	%	1.6	%	5.3	%	0.6	%	2.5	%
AT	2.8		3.6		1.5		2.1		2.1

ROA = Net income without interest expense divided by average total assets. Because interest expense is already taken out of Net income you have to add to back less the 35% tax rate.

(net income + (interest expense x .65))/average total assets = answer

Profit Margin is Net income without interest expense divided by sales revenue

(net income + (interest expense x .65))/Sales revenue = answer

First 2 rows are wrong, please help