Returns on Assets-Jen and Larry’s frozen yogurt venture described in Problem 3 required some investment in bricks and mortar. Initial specialty equipment and the renovation of an old warehouse...

Returns on Assets-Jen and Larry’s frozen yogurt venture described in Problem 3 required some investment in bricks and mortar. Initial specialty equipment and the renovation of an old warehouse building in lower downtown, referred to as LoDo, cost $450,000 at the beginning of 2010. At the same time, $50,000 was invested in inventories. In early 2011, an additional $100,000 was spent on equipment to support the increased frozen yogurt sales in 2011. Use information from Problem 3 and this problem to solve the following:

A. Calculate the ROA in both 2010 and 2011.

B. Calculate the asset intensity or asset turnover ratios for 2010 and 2011.

C. Apply the ROA model to Jen and Larry’s frozen yogurt venture.

D. Briefly describe what has occurred between the two years.

E. Show how you would position Jen and Larry’s frozen yogurt venture in terms of the relationship between net profit margins and asset turnovers depicted in Figure 2.10.

FIGURE 2.9 CLASSIFICATION GUIDELINES FOR COMPLETING THE VOS INDICATOR^™