Information used to examine the profit margin management path comes from the retailer's income statement, which summarizes a firm's financial performance over a period of time. The information used to analyze a retailer's asset management path primarily comes from the retailer's balance sheet. Whereas the income statement summarizes the financial performance over a period of time, the balance sheet summarizes a retailer's financial position at a given point in time, typically at the end of the fiscal year.

The strategic profit model is a method for summarizing the factors that affect a firm's financial performance, as measured by return on assets. Return on assets is an important performance measure for a firm and its stockholders because it measures the profits that a firm makes relative to the assets it possesses. The strategic profit model decomposes ROA into two components: (1) operating profit margin percentage and (2) asset turnover. These two components illustrate that ROA is determined by two sets of activitiesâprofit margin management and asset turnover managementâand that a high ROA can be achieved by various combinations of operating profit margins and asset turnover levels.


1. Net Sales minus cost Of Goods sold
2. Net Profit Margin Percentage divided by Asset Turnover
3. Total Current Assets plus Total Fixed Assets
4. Net Profit before Taxes minus Taxes
5. Net Profit after Taxes divided by Net Sales
6. Gross Margin minus Operating Expenses
7. Net Sales divided by Total Assets


Match each of the options above to the items below.

a. Total Assets (All of the retailers combined assets)
b. Asset Turnover (This financial measure assesses the productivity of a firm's investment in its assets and indicates how many dollars are generated for each dollar Of assets)
c. Gross Margin (This measure indicates how much profit the retailer is making on merchandise sold, without considering the expenses associated with operating the store)
d. Net Operating Profit before Taxes (This measure Indicates how much profit a retailer is making before taxes are taken out)
e. Net Profit after Taxes (This measure indicates how much profit a retailer is making after taxes are taken out)
f. Net Profit Margin Percent (This financial measure is expressed as a percentage of net sales to facilitate comparisons across items, categories, and departments)
g. Return on Assets (This financial measure evaluates the profit generated by the assets possessed by the firm)