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SUPERVALU, one of the largest grocery retailers in the United States, is headquartered in Minneapolis. Suppose...

SUPERVALU, one of the largest grocery retailers in the United States, is headquartered in Minneapolis. Suppose the following financial information (in millions) was taken from the company’s 2022 annual report: net sales $44,597, net income $393, beginning stockholders’ equity $2,581, and ending stockholders’ equity $2,887. There were no dividends paid on preferred stock. The return on common stockholders’ equity is 14.37%.

Provide a brief interpretation of your findings.

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Answer #1

The company has a Sales of $44,597 for which they are able to generate a net income of $393. This means that the company is able to generate a profit of 0.88%. In other words, for every $100 of sale, it contributes 88 cents towards shareholders profit.

The change in the Equity from the opening balance to the ending balance is only $306. While we have a profit of 393. This means $87 has other comprehensive loss incurred by the company as there were no dividends paid for the period.

To confirm the calculation of 14.37 % as ROE. we can consider. Net profit / Average equity

=393/[(2581+2887)/2]

PLease not all dollar values are in Millions

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