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Ratio Anaysis: Profitability, Liquidity & Asset Utilization

See attached file.

Using the financial ratios listed in the excel spreadsheet. Please show the calculations need to calculate the ratios below for column B only. Column C, D, E, & F are locked.

For example, I know that to calculate Gross profit margin is:

(revenue - cost of goods sold) / revenues

I also understand that calculating cost of goods sold is:

Cost of Goods Sold = Beginning Inventory + Inventory Purchases รข?" End Inventory

Where i am having difficulty understanding where these numbers are located in the financial data shown in columns J through Q.

Therefore, if you would be so kind as to provide the calculations for the ratios listed I can then continue the work for the other years required.

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In order for you to have a better understanding of how to complete the excel spreadsheet given to you, I will go through how each ratio is calculated, and in particular use data given for 2006 as illustration for each.

The first ratio you have been asked to calculate is the gross profit margin ratio. This ratio tells you what percentage of sales turned out to be gross profit. It is calculated as follows:

Gross Profit Margin = Gross Profit (or Revenue - Cost of Sales)/ Total Revenue x 100

Hence, the gross profit margin for Panera Bread Company in 2006 is:

Gross Profit Margin = ($828,971 - ($542,916 + $85,618) / $828,971 x 100 = 24.2%

The second ratio that you are required to calculate is the operating profit margin and it tells you what percentage of sales turned out to be operating profit. It is calculated quite similar to the gross profit margin and is done as follows:

Operating Profit Margin = Operating Profit / Sales x 100

Hence, the operating profit margin for Panera Bread Company is:

Operating Profit Margin = $90,792 / $828,971 x 100 = 10.95% or 11%

The third ratio that you are to calculate is the net profit margin. This ratio is also really just net profit expressed as a percentage of sales. It is calculated as follows:

Net Profit Margin = Net Profit or Income / Sales x 100

The net profit margin for Panera Bread Company is:

Net Profit Margin = $58,849 / $828,971 x 100 = 7.1%

The next ratio you have been asked to calculate is the return on total assets. This ratio seeks to measure how effectively a company uses its assets. It is calculated as follows:

Return on Assets = Net Profit or Income / Total Assets x 100 (NB. Total assets is found under the Balance Sheet Data section)

Therefore, at Panera Bread Company for 2006, the return on assets is:

Return on Assets = $58,849 / $542,609 x 100 = 10.84%

According to Investopedia, "return on stockholder's equity is the amount of net income returned as a percentage of shareholders equity. It measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested." It is calculated as follows:

Return on Equity = Net Profit or Income / Stockholders' Equity (which is found under the Balance Sheet Data)

Panera Bread's return on equity for 2006 is:

Return on Equity = $58,849 / $397,666 x 100 = 14.8%

The next ratio that you are required to calculate is the earnings per share (which is already given in the ...

Solution Summary

This solution provides you with information related to how to calculate ratios related to profitability, liquidity and asset utilization. The figures used for the examples given for each ratio was derived from the financial statements of Panera Bread. Solution is adequately referenced.

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