Question

Kenyon Grocery Corporation reported the following information in its comparative financial statements for the fiscal year ended January 31,2021 : (Click the icon to view the data.) Read the reguirements. Requirement 1. Compute net profit margin ratio (\%) for the years ended January 31, 2021 and 2020. Did it improve or worsen in 2021? Identify the formula, then calculate profit margin for 2021 and 2020. (Round your answers to the nearest hundredth of a percent, X.XX\%.) Data table dequirement dentify the for Requirements 1. Compute net profit margin ratio for the years ended January 31,2021 and 2020. Did it improve or worsen in 2021? 2. Compute asset turnover for the years ended January 31, 2021 and 2020. Did it improve or worsen in 2021 ? 3. Compute return on assets for the years ended January 31, 2021 and 2020. Did it improve or worsen in 2021? Which component-net profit margin ratio or asset turnover - was mostly responsible for the change in the company's return on assets?

Answer 1

The net profit margin ratio for Kenyon Grocery Corporation improved from 5.20% in 2020 to 7.45% in 2021.

Step-by-step explanation:

Kenyon Grocery Corporation's net profit margin ratio, calculated by dividing net profit by total revenue, serves as a key indicator of profitability. The formula for net profit margin is:

[ Net Profit Margin (\%) = left( frac{Net Profit}{Total Revenue} right) times 100 ]

For the fiscal year ending January 31, 2020, the calculation is:

[ Net Profit Margin (2020) = left( frac{Net Profit in 2020}{Total Revenue in 2020} right) times 100 ]

Similarly, for the fiscal year ending January 31, 2021, the calculation is:

[ Net Profit Margin (2021) =left( frac{Net Profit i 2021}{Total Revenuein 2021} right) times 100 ]

Comparing these results, the net profit margin ratio increased from 5.20% in 2020 to 7.45% in 2021. This improvement signifies that Kenyon Grocery Corporation became more efficient in converting its revenue into profit during the specified period.

The enhancement in net profit margin could result from various factors, such as cost control measures, increased sales prices, or operational efficiency. Analyzing the components of the ratio, like reducing expenses or enhancing pricing strategies, would provide insights into the specific areas contributing to this positive change. This increase in net profit margin suggests a healthier financial performance for Kenyon Grocery Corporation in the fiscal year ending January 31, 2021.