Please provide the answers to the three questions showing your calculations.
Homework Assignment - Chapter 4 1. Below is financial information for two restaurant retailers. Popper's Company operates an innovative retail bakerycafe business and franchising business. At the end 2010, Popper's had 132 companyowned and 346 franchiseoperated bakerycafes. Popper's located most of their unique bakerycafe concept stores in suburban, strip mall, and regional mall locations. As a first mover in this concept, the company operates in 32 states. Simmer Corporation began operations five years earlier than Popper's and purchases and roasts whole bean coffees and sells them, along with numerous coffee drinks and related products at over 2,900 Companyoperated retail stores. Selected Data for Popper's Company and Simmer Corporation (amounts in millions) Sales Cost of Goods Sold Interest Expense Net Income Average Inventory Average Fixed Assets Average Total Assets Simmer $4,076 1,686 0 268 303 2,163 2,472 Popper's $278 97 0 22 4 130 166 Required: a. Compute the rate of return on assets for each firm. Disaggregate the rate of return on assets into profit margin and assets turnover components. The income tax rate is 35%. b. Describe the likely reasons for the differences in the profit margins and assets turnovers of the two companies. 2. Sensitron and Douglas Tools manufacture and market power tools and accessories. Sensitron targets customers in the professional contractor market, while Douglas Tools focuses on home users and professionals. Selected financial data for the companies appears below. Sensitron Sales Average Accounts Receivable Change in Sales from previous year Douglas Tools Sales Average Accounts Receivable Change in Sales from previous year Required: 2010 1. 2. Calculate the accounts receivable turnover ratio for each firm for 2008. Suggest reasons for the differences in the accounts receivable turn two firms. 3. Linda's Clothing is a retailer of contemporary women's clothing. Selected financial information for Linda's appears below: Net Income Total Assets at yearend Weighted Average number of shares Outstanding Total Liabilities at yearend Common Stockholders' Equity at yearend Interest Expense 2011 $ 56,759 $381,500 2010 $ 31,150 $246,250 2009 $ 15,375 $145,490 2008 $14,750 $71,268 84,215 205,967 $175,533 165 80,546 119,657 $126,593 195 77,965 60,522 $ 84,968 258 75,888 17,623 $53,645 368 Required: a. Compute the rate of return on assets for the years 20092011. Linda's has an effective tax rate of 35%. b. Compute the rate of return on common shareholders' equity for the years 20092011. c. Compute basic earnings per share for the years 20092011. d. Interpret the changes in ROA versus ROCE and EPS over the threeyear period
