ROA Asset Turnover Profit Marg
| ROA | Asset Turnover | Profit Margin | COGS to Revenue | |
| Carmax | 4.46% | 1.02 | 4.37% | 0.87 |
| AutoNation | 4.25% | 2.01 | 2.11% | 0.83 |
Does the relative size of the cost of goods sold to revenueratio help explain the difference in the ROA profit margin and ROAfor the two firms?
Answer:
No, the relative size of the cost of goods sold is not relevantin determination of the difference of return on asset profit marginin accordance with return on asset for the two companies because itis due to the Asset turnover ratio which is reflecting theefficiency of the use of different asset by the company because itcan be seen that autonation has higher amount of sales generatedout of its assets and it has maintained a higher volume rather thanmaintenance of higher profits so it can be said that the companyhas right to maintain a very high volume of sales by a very lowerAMOUNT of assets so it is due to the volume generation by thecompany that asset turnover ratio is higher and the profit marginsare lower because the volume has been highly generated and thesales has been highly generated but the profitability has not beenmaintained as it has sold its product at a lower price so theprofit margin has relatively shrinked.
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