Expand Your Critical Thinking 7-3

The March 29, 2012, edition of the Wall Street Journal Online contains an article by Miguel Bustillo entitled, Best Buy Forced to Rethink Big Box. The article explains how the 1,100 giant stores, which enabled Best Buy to obtain its position as the largest retailer of electronics, are now reducing the companys profitability and even threatening its survival. The problem is that many customers go to Best Buy stores to see items but then buy them for less from online retailers. As a result, Best Buy recently announced that it would close 50 stores and switch to smaller stores. However, some analysts think that these changes are not big enough. Suppose the following data were extracted from the 2017 and 2012 annual reports of Best Buy. (All amounts are in millions.)

		2017		2016		2012		2011
Total assets at year-end		$17,825		$18,342		$11,688		$10,258
Net sales		50,324				30,800
Net income		1,261				1,163

Using the data above, answer the following questions.

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Compute the profit margin, asset turnover, and return on assets for 2017 and 2012. (Round all percentages to 1 decimal places, e.g. 15.1% and asset turnover ratio to 2 decimal places, e.g. 15.21.)

		2017			2012
Profit Margin			%			%
Asset Turnover			times			times
Return on Assets			%			%

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Present the ratios calculated above in the equation format. (Round asset turnover ratio to 2 decimal places, e.g. 15.21 and all other answers to 1 decimal places, e.g. 15.1%.)

		Profit Margin					Asset Turnover		=		Return on Assets
2012			%						=		%
2017			%						=		%

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