Question

Compute and Interpret ROA, Profit Margin, and Asset Turnover of Competitors
Selected balance sheet and income statement information for McDonald's Corporation and Yum! Brands, Inc., follows (in millions).

	Sales Revenue	Interest Expense	Net Income	Average Total Assets
McDonalds	$32,853	$671	$5,758	$46,995
Yum! Brands	15,031	180	1,196	10,375

a. Compute the return on assets (ROA) for each company. Assume a tax rate of 35%. Do not round until your final answer.
Round answer to one decimal place (i.e., 0.2568 = 25.7%).

McDonalds	Answer
Yum! Brands	Answer

b. Disaggregate ROA into profit margin (PM) and asset turnover (AT) for each company.
Do not round until your final answers. Round PM and ROA to one decimal place (i.e., 0.2568 = 25.7%).
Round AT to 3 decimal places.

	PM	X	AT	=	ROA
McDonalds	Answer		Answer		Answer
Yum! Brands	Answer		Answer		Answer

Compute and Interpret Liquidity and Solvency Ratios

Selected balance sheet, income statement and cash flow statement information from Tesla, Inc. for 2017 and 2016 follows ($ thousands).

December 31	2017	2016
Cash and cash equivalents	$3,701,247	$3,726,549
Restricted cash	156,545	106,741
Net receivables	515,381	499,142
Inventory	2,263,537	2,067,454
Other current assets	268,365	194,465
Current assets	6,905,075	6,594,351
Current liabilities	7,674,670	5,827,005
Total liabilities	23,022,980	16,750,167
Stockholders' equity	5,965,725	6,247,242

Year ended December 31,	2017
Loss before income taxes	$(2,209,032)
Interest expense	504,592
Cash flows from operating activities	(59,432)
Capital expenditures	(3,748,147)

a. Compute the current ratio and quick ratio for each year.

Note: Round answers to two decimal places.

	2017	2016
Current ratio	Answer	Answer
Quick ratio	Answer	Answer

b. Compute the debt-to-equity ratio for 2017 and 2016 and the times-interest-earned ratio for 2017.

Note: Round answers to two decimal places. Use a negative sign with your answer, if appropriate.

	2017	2016
Debt-to-equity ratio	Answer	Answer
Times interest earned ratio	Answer

c. Compute the cash burn rate for 2017.

Note: Round answer to the nearest whole number. Use a negative sign with your answer, if appropriate.

$Answer  thousand per day

Common-Size Income Statements
Following is the income statement for Target Corporation. Prepare Target's common-size income statement for the fiscal year ended January 28, 2012.

($ millions)	Fiscal year ended January 28, 2012
Sales	$70,466
Net credit card revenues	1,399
Total revenues	71,865
Cost of sales	47,860
Selling, general and administrative expenses	14,106
Credit card expenses	446
Depreciation and amortization	2,131
Earnings before interest expense and income taxes	7,322
Net interest expense	866
Earnings before income taxes	6,456
Provision for income taxes	1,527
Net earnings	$4,929

Note: Round your answers to one decimal place (ex: 0.0715 = 7.2%).

TARGET CORPORATION Common-Size Income Statement
	Year Ended January 28, 2012
Sales	Answer
Net credit card revenues	Answer
Total revenues	Answer
Cost of sales	Answer
Selling, general and administrative expenses	Answer
Credit card expenses	Answer
Depreciation and amortization	Answer
Earnings before interest expense and income taxes	Answer
Net interest expense	Answer
Earnings before income taxes	Answer
Provision for income taxes	Answer
Net earnings	Answer

Computing Turnover Ratios for Companies in Different Industries

Selected data from recent financial statements of The Procter & Gamble Company, CVS Health Corporation, and Valero Energy Corporation are presented below:

($ millions)	Procter & Gamble	CVS Health	Valero Energy
Sales	$88,680	$29,006	$127,987
Cost of sales	43,391	7,167	116,719
Average receivables	6,172	1,257	6,645
Average inventories	7,050	113	5,285
Average PP&E	20,835	22,448	23,923
Average total assets	135,299	32,483	40,202

a. Compute the asset turnover (AT) ratio for each company. (Round your answers to one decimal place.)

	Asset Turnover
Procter & Gamble	Answer
CVS	Answer
Valero Energy	Answer

b. Compute the accounts receivable turnover (ART), inventory turnover (INVT), and PP&E turnover (PPET) for each company. (Round your answers to one decimal place.)

	ART	INVT	PPET
Procter & Gamble	Answer	Answer	Answer
CVS	Answer	Answer	Answer
Valero Energy	Answer	Answer	Answer

Answer 1

1)
	a)	ROA = Net Income / Average Assets
		McDonalds =5,758/46,995
		=12.3%
		Yum! Brands = 1,196/10,375=
		11.5%
	b)
		Profit Margin = Net income / Sales
		Asset Turnover Ratio = Sales / Average Assets
		ROA = Net Income / Average Assets
	McDonalds
	[$5758/32853)]*[32853/46995] = 12.3%
	17.5%	*	69.9%	=	12.3%
	Yum! Brands
	[1,196/15,031]*[15,031/10375]=11.5%
	8.0%	*	144.9%	=	11.50%
2)	Current Ratio = Current Assets / Current Liabilities
			2017	2016
			0.90	1.13
			(6,905,075/7,674,670)	(6,594,351/5,827,005)
	Quiick Ratio = Cash and cash equivalents+Net receivables / current liabilities
			2017	2016
			0.55	0.73
			(3,701,247+515,381/7674670)	(3,726,549+499,142)/5,827,005
b)	Debt To Equity Ratio = Total Debt / Equiy
			2017	2016
			3.86	2.68
			(23,022,980/5,965,725)	(16,750,167/6,247,242)
	Times Interest Earned Ratio = EBIT/ Interest expenses
			2017
			-4.38
			(-2,209,032/504,592)
	Cash burn rate = Capital Expenditure/Cash flows from operating activities
		63.07