Profit Margin

In response to complaints about high prices, a grocery chain runs the following advertising campaign: “If you pay your child 50 cents to go buy $25 worth of groceries, then your child makes twice as much on the trip as we do.” You’ve collected the following information from the grocery chain’s financial statements:

(millions)

Sales

$550.0

Net income

5.5

Total assets

140.0

Total debt

90.0

Evaluate the grocery chain claim. What is the basis for the statement? Is this claim misleading? Why or why not?