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

Assets turnover ratio = 1.81

profit Margin = 3.04 %

Step-by-step 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 =
`(13073.1 + 13717.3)/(2 )`

Average total Assets = 13395.2

put here value we get

Assets turnover ratio =
`(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 =
`(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