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    Interpreting Financial Reports/Comparison of Profitability

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    Two of the largest chains of grocery stores in the U.S. are Albertson's, Inc. and A & P. In a recent fiscal year, Albertson's had a net income of $765 million, and A & P had a net income of $14 million. It is difficult to judge which company is more profitable from those figures alone because they do not take into account the relative sales, sizes, and investments of the companies. Data (in millions) needed to complete a financial analysis of the two companies follow.

    Albertson's A & P
    Net sales $36,762 $10,151

    Beginning total assets 15,719 3,335
    Ending total assets 16,079 3,309
    Beginning total liabilities 10,017 2,489
    Ending total liabilities 10,394 2,512
    Beginning stockholders equity 5,702 846
    Ending stockholders' equity 5,684 797

    Please determine which company was more profitable by computing profit margin, asset turnover, return on assets, debt to equity ratio, and return on equity for the two companies. Comment on the relative profitability of the two companies.

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    Solution Summary

    The expert interprets financial reports and comparisons of profitability.