This problem compares the profitability and risk ratios of three leading discount chains: Cartoo, Taggle, and Wilmet. Cartoo is headquartered in Spain, and Taggle and Wilmet are headquartered in the United States. Exhibits 7.20 and 7.21 present profitability ratios for Cartoo, Taggle, and Wilmet for fiscal years 2011, 2012, and 2013. Exhibit 7.22 presents risk ratios for the three firms. Exhibit 7.23 presents selected other data for these firms. All amounts are expressed in U.S. dollars to permit comparability across the firms. The first item in Exhibit 7.23 shows both the increase in total sales and, in brackets, the increase in sales of stores that have been open for at least two full years (same store sales). The increase in total sales equals the sum of increases in same store sales and increases in sales due to opening new stores and acquiring new stores through corporate acquisitions. Study these financial ratios and respond to the following questions:
a. Wilmet and Taggle follow different strategies. Wilmet consistently has a higher rate of return on assets (ROA) than Taggle. Using information in the exhibits, suggest reasons for these differences in operating profitability.
b. Wilmet and Cartoo follow similar strategies. Wilmet consistently outperforms Cartoo on ROA. Using information in the exhibits, suggest reasons for these differences in operating profitability.
c. Do any of these firms appear unduly risky as of the end of 2013?
Bullseye Corporation Financial Ratio Analysis (Problem 25) EXHIBIT 7.19 For Fiscal Year: 2012 2011 Return on Assets.... Profit Margin ... 7.4% 6.9% 4.8% 4.7% Total Assets Turnover. 1.5 1.5 Other Revenues/Sales Cost of Goods Sold/Sales . Selling and Administrative Expenses/Sales Interest Expense/Sales. ... Income Tax Expense/Sales . 2.8% 2.7% 68.1% 68.1% 25.9% 26.1% 1.0% 1.0% 2.3% 2.9% Accounts Receivable Turnover Ratio. 9.8 9.6 Inventory Turnover Ratio . Fixed-Assets Turnover Ratio 6.5 6.2 2.7 2.7 Return on Equity... Financial Leverage-ratio' data-toggle="tooltip" data-placement="top" title="Click to view definition...">Leverage Ratio Current Ratio ... Quick Ratio ... Accounts Payable Turnover Ratio.. 18.7% 17.7% 2.5 2.6 1.3 1.5 0.6 0.8 6.2 5.9 ... Cash Flow from Operations to Current Liabilities Ratio. Liabilities to Assets Ratio. . 47.0% 50.0% 59.5% 61.0% Long-Term Debt Ratio Debt-Equity Ratio ... Cash Flow from Operations to Total Liabilities Ratio . 25.7% 29.0% 63.5% 74.5% 21.5% 20.8% Interest Coverage Ratl . 8.5 8.9 O Cengage Learning 2014
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