Computing Return on Equity and Return on Assets

The following table contains financial statement information for Wal-Mart Stores, Inc.

$ millions Total Assets Net Income Sales Equity 2015 $199,581 $14,694 $478,614 $80,546 2014 203,490 16,363 482,229 81,394 2013 204,751 16,022 473,076 76,255

(a) Compute the return on equity (ROE) for 2014 and 2015. (Round your answers to one decimal place.)

2015 ROE =Answer

%

2014 ROE =Answer

%

What trend, if any, is evident? How does Wal-Mart's ROE compare with the approximately 18.9% median ROE for companies in the Dow Jones Industrial average for 2015?

Wal-Mart's ROE decreased from 2014 to 2015 and is lower to the median for other companies in the Dow Jones average.

Wal-Mart's ROE increased slightly from 2014 to 2015 and is slightly above the median for other companies in the Dow Jones average.

Wal-Mart's ROE increased from 2014 to 2015 but is lower thanthe median for other companies in the Dow Jones average.

Wal-Mart's ROE decreased from 2014 to 2015 but still exceeds the median for other companies in the Dow Jones average.

(b) Compute the return on assets (ROA) for 2014 and 2015. (Round your answers to one decimal place.)

2015 ROA =Answer

%

2014 ROA =Answer

%

What trend, if any, is evident? How does Wal-Mart's ROA compare with the approximately 7.1% median ROA for companies in the Dow Jones Industrial average for 2015?

Wal-Mart's ROA increased slightly from 2014 to 2015 and is above the median for other Dow Jones companies.

Wal-Mart's ROA decreased from 2014 to 2015and is lower thanthe median for other Dow Jones companies.

Wal-Mart's ROA increased from 2014 to 2015 butis slightly below the median for other Dow Jones companies.

Wal-Mart's ROA decreased slightly from 2014 to 2015 but still exceeds the median for other Dow Jones companies.

(c) Which of the following factors might allow a company like Wal-Mart Stores, Inc to reap above-average returns?

Wal-Mart Stores, Inc operates with more assets and equity than the average company.

Wal-Mart Stores, Inc's spends very little on advertising, thusgenerating agreater profit onsales.

Wal-Mart has considerable market power over suppliers as a result of its considerable size, which may result in product cost savings.

Wal-Mart Stores, Inc's sales level is greater than the typical company.