In early 2013, Jennifer (Jen) Liu and Larry Mestas founded Jen and Larry’s Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale of frozen yogurt. They began producing small quantities of unique flavors and blends in limited editions. Revenues were $600,000 in 2019 and were estimated at $1.2 million in 2020. Because Jen and Larry were selling premium frozen yogurt containing premium ingredients, each small cup of yogurt sold for $3, and the cost of producing the frozen yogurt averaged $1.50 per cup. Other expenses, including taxes, averaged an additional $1 per cup of frozen yogurt in 2019 and were estimated at $1.20 per cup in 2020. Jen and Larry’s frozen yogurt venture 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 2019. At the same time, $50,000 was invested in inventories. In early 2020, an additional $100,000 was spent on equipment to support the increased frozen yogurt sales in 2020. A. Calculate the ROA in both 2019 and 2020 B. Show how you would position Jen and Larry’s frozen yogurt venture in terms of the relationship between net profit margins and asset turnovers on a graph.
In early 2013, Jennifer (Jen) Liu and Larry Mestas founded Jen and Larry’s Frozen Yogurt Company, which was based on the idea of applying the microbrew or microbatch strategy to the production and sale of frozen yogurt. They began producing small quantities of unique flavors and blends in limited editions. Revenues were $600,000 in 2019 and were estimated at $1.2 million in 2020. Because Jen and Larry were selling premium frozen yogurt containing premium ingredients, each small cup of yogurt sold for $3, and the cost of producing the frozen yogurt averaged $1.50 per cup. Other expenses, including taxes, averaged an additional $1 per cup of frozen yogurt in 2019 and were estimated at $1.20 per cup in 2020. Jen and Larry’s frozen yogurt venture 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 2019. At the same time, $50,000 was invested in inventories. In early 2020, an additional $100,000 was spent on equipment to support the increased frozen yogurt sales in 2020.
A. Calculate the ROA in both 2019 and 2020
B. Show how you would position Jen and Larry’s frozen yogurt venture in terms of the relationship between net profit margins and asset turnovers on a graph.
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