Question
The income statement for Western Grain Company, a producer of agricultural products for industrial as well as consumer markets, is shown here. Western Grains total
The income statement for Western Grain Company, a producer of agricultural products for industrial as well as consumer markets, is shown here. Western Grains total assets are $4,237.1 million, and its equity is $1,713.4 million.
Consolidated Earnings and Retained Earnings Year Ended December 31
(Millions) | 2017 |
Net sales | $6,295.4 |
Cost of goods sold | 2,989.0 |
Selling and administrative expense | 2,237.5 |
Operating profit | 1,068.9 |
Interest expense | 33.3 |
Other income (expense), net | (1.5) |
Earnings before income taxes | 1,034.1 |
Income taxes | 353.4 |
Net earnings | 680.7 |
(Net earnings per share) | $2.94 |
Retained earnings, beginning of year | 3,033.9 |
Dividends paid | (305.2) |
Retained earnings, end of year | $3,409.4 |
Calculate the following profitability ratios: profit margin, return on assets and return on equity. Assume that the industry averages for these ratios are as follows: profit margin, 12 percent; return on assets, 18 percent; and return on equity, 25 percent. Evaluate Western Grains profitability relative to the industry averages. Why is this information useful?
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