Net Profit X Asset = Return on Assets   Margin Turnover 
La Madeline Bakery 1% X 10 times = 10%
alame !e"elry 10% X 1 time = 10%
 
The Strategic #rofit Model$  An O%er%ie"
Profit Margin x Asset turnover = Return on assets
 
Net Profit Margin
Asset Turnover 
Total Assets
)et #rofit Margin
Total Assets =   Net #ales
PPT 6-$
#rofit Margin Models for 2al&Mart Stores3 Inc-3 and Tiffany 4 Co- /5 in millions0
Net #ales
578397
5 736:;
5 639<>
5 7;<
Net sales
578397
5 736:;
$ross Margin = $ross Margin %   Net #ales
7al4Mart8 9 :;+)0 = % 9+1<;:1+
Tiffany8 9 < = % 91;*0
Tiffany8 9 < = % 91;*0
Total +,pendit(res . )et Sales Ratios for 2al&Mart and Tiffany 
Total &'enses = Total &'enses>Net sales ratio   Net #ales
7al4Mart8 9 ;<< = % 9+1<;:1+
Tiffany8 9 *) = % 91;*0
7al4Mart8 9 ;<< = % 9+1<;:1+
Tiffany8 9 *) = % 91;*0
PPT 6-11
 
Tiffany$ 5 67 ? @ 5736=:
Tiffany$ 5736:; ? 573>9>
  Net #ales = Asset turnover  Total assets
7al4Mart8 9+1<;:1+ = 9 :;)1
Tiffany8 91;*0 = 91;*0
 
  = Net 'rofit   Total assets
 
Level of 2ut'ut -n'ut Produ.tivity
2rgani?ation @2ut'ut>-n'ut
(or'orate )et sales S(are feet of Ret(rn on assets
/meas(res of store space
employees
profits
e,pendit(res foot
Level of 2ut'ut -n'ut Produ.tivity
2rgani?ation @2ut'ut>-n'ut
management Ret(rn on
merchandise
e,penses percentage of  
merchandise percentage of  
 
Level of 2ut'ut -n'ut Produ.tivity
2rgani?ation @2ut'ut>-n'ut
#tore o'erations )et sales S(are feet of )et sales per  
/meas(res for a selling areas s(are foot
store or
"ithin a store0 (tilities sales associate
or per selling ho(r 
associates a percentage of  
 
Ill(strati%e #rod(cti%ity Meas(res Used by Retailing Organiations
Level of 2ut'ut -n'ut Produ.tivity
2rgani?ation @2ut'ut>-n'ut
/chief e,ec(ti%e o"nersD e(ity ?
officer0 ret(rn on o"nersD
/merchandise in%entory ? manager and *MROI
b(yer0
/director of stores3 s(are foot
store manager0