1 answer

ADM 1 GNC: Franchise segment return on investment HEAL WALD GNC Holdings Inc. is a leading...

Question:

ADM 1 GNC: Franchise segment return on investment HEAL WALD GNC Holdings Inc. is a leading retailer of health and nutrition p

ADM 1 GNC: Franchise segment return on investment HEAL WALD GNC Holdings Inc. is a leading retailer of health and nutrition products, which are sold through both company-operated (3,500 outlets) and franchised retail (3,200 outlets) stores. In addition, GNC manufactures many of the products that it sells through its company-operated and franchised channels. As such, GNC's operating segments are Retail, Franchise and Manufacturing. The Retail segment is made up of company-operated stores, and the Franchise segment is made up of franchised stores. Recent financial information from these segments is as follows (in millions): Retail Franchise Manufacturing 5433 $486 $1.939 349 157 90 Sales Income from operations Invested assets 1.573 512 407 A. Determine the profit margin for each segment (Round percentages to one decimal place.) B. Why might the profit margin of the Franchise segment be larger than the other two segments? C. Determine the investment turnover for each segment. (Round to one decimal place.) D. Use the DuPont formula to determine the return on investment for each segment. (Round percentages to one decimal place.) E. What is the source of revenues for the Manufacturing segment? What are the revenue reporting considerations for sales to company-operated stores?

Answers

As per HOMEWORKLIB RULES I can only solve the first 4 subparts of a question
Retail Franchise Manufacturing
Sales 1939 433 486
Income from operations 349 157 90
Invested Assets 1573 512 407
a Profit Margin =Net operating income / Net Sales 18.0% 36.3% 18.5%
b Franchise segment has higher Profit margin due to its economies of scale, it has its own outlets and it is selling the products
at a higher margin to the customers.Also it is receiving products from manufacturing segments at a lower price and hence the
Profit margin is greater than Retail and manufacturing
c Retail Franchise Manufacturing
Sales 1939 433 486
Invested Assets 1573 512 407
Investment Turnover =Net sales / Average Invseted Assets 1.2 0.8 1.2
d Retail Franchise Manufacturing
Profit Margin 18% 36.30% 18.50%
Investment Turnover 1.2 0.8 1.2
ROI =Profit Margin*Investment Turnover 21.6% 29.0% 22.2%
.

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