Question

Staples, Inc. is one of the largest suppliers of office products in the United States.
Suppose it had net income of $738.7 million and sales of $24,275.5 million in 2014. Its total assets were $13,073.1 million at the beginning of the year and $13,717.3 million at the end of the year.

What is Staples, Inc.’s

(a) asset turnover

(b) profit margin?

(Round to two decimals.) Provide a brief interpretation of your results.

Answer 1

Answer:

Assets turnover ratio = 1.81

profit Margin = 3.04 %

Explanation:

given data

net income = $738.7 million

sales = $24,275.5 million

total assets beginning = $13,073.1 million

total assets end  = $13,717.3 million

to find out

asset turnover  and profit margin

solution

first we get here Assets turnover ratio that is

Assets turnover ratio = net Sales ÷ Average total Assets     ...............1

Average total Assets  = $\frac{13073.1 + 13717.3}{2 }$

Average total Assets  = 13395.2

put here value we get

Assets turnover ratio = $\frac{24275.5}{3395.2 }$

Assets turnover ratio = 1.81

so that we can say that for the every dollar in assets Staples only generates =  1.33 cents

and

now we get profit Margin that is express as

profit Margin = Net Income ÷  net Sales      ....................2

put here value we get

profit Margin = $\frac{738.7}{24275.5}$

profit Margin = 3.04 %

we see here Profit margin ratio is low so that they only converted 3.04 % of their sale in to the profit