Computing Return on Equity and Return on Assets
The following table contains financial statement information forWal-Mart Stores, Inc.
| $ millions | Total Assets | Net Income | Sales | Equity |
|---|
| 2015 | $199,581 | $14,694 | $478,614 | $80,546 |
| 2014 | 203,490 | 16,363 | 482,229 | 81,394 |
| 2013 | 204,751 | 16,022 | 473,076 | 76,255 |
(a) Compute the return on equity (ROE) for 2014 and 2015. (Roundyour answers to one decimal place.)
2015 ROE =Answer
%
2014 ROE =Answer
%
What trend, if any, is evident? How does Wal-Mart's ROE comparewith the approximately 18.9% median ROE for companies in the DowJones Industrial average for 2015?
Wal-Mart's ROE decreased from 2014 to 2015 and is lower to themedian for other companies in the Dow Jones average.
Wal-Mart's ROE increased slightly from 2014 to 2015 and isslightly above the median for other companies in the Dow Jonesaverage.
Wal-Mart's ROE increased from 2014 to 2015 but is lower than themedian for other companies in the Dow Jones average.
Wal-Mart's ROE decreased from 2014 to 2015 but still exceeds themedian for other companies in the Dow Jones average.
Mark 1.00 out of 1.00
(b) Compute the return on assets (ROA) for 2014 and 2015. (Roundyour answers to one decimal place.)
2015 ROA =Answer
%
2014 ROA =Answer
%
What trend, if any, is evident? How does Wal-Mart's ROA comparewith the approximately 7.1% median ROA for companies in the DowJones Industrial average for 2015?
Wal-Mart's ROA increased slightly from 2014 to 2015 and is abovethe median for other Dow Jones companies.
Wal-Mart's ROA decreased from 2014 to 2015 and is lower than themedian for other Dow Jones companies.
Wal-Mart's ROA increased from 2014 to 2015 but is slightly belowthe median for other Dow Jones companies.
Wal-Mart's ROA decreased slightly from 2014 to 2015 but stillexceeds the median for other Dow Jones companies.
Mark 1.00 out of 1.00
(c) Which of the following factors might allow a company likeWal-Mart Stores, Inc to reap above-average returns?
Wal-Mart Stores, Inc operates with more assets and equity thanthe average company.
Wal-Mart Stores, Inc's spends very little on advertising, thusgenerating a greater profit on sales.
Wal-Mart has considerable market power over suppliers as aresult of its considerable size, which may result in product costsavings.
Wal-Mart Stores, Inc's sales level is greater than the typicalcompany.
