Response to the following problem:
The Barron Company had the following results for the period 1998 to 2003:
|
Year
|
Net Profit Margin
|
Return on Assets
|
|
1998
|
5%
|
10%
|
|
1999
|
6%
|
9%
|
|
2000
|
4%
|
3.2%
|
|
2001
|
4%
|
2.8%
|
|
2002
|
4%
|
3%
|
|
2003
|
5%
|
3%
|
Barron's management was concerned about the declining return on assets.
a. Calculate the total asset turnover for Barron Company for each year.
b. Explain the trend in return on assets using the trends in net profit margin and asset turnover.