Question

Use the following financial statements for Lake of Egypt Marina, Inc. LAKE OF EGYPT MARINA, INC Balance Sheet as of December 31, 2018 and 2017 (in millions of dollars) 2018 2017 2018 2017 Liabilities and Equity Current liabilitiest AssetB Current assets Cash and marketable securities Accounts receivable Inventory 40 30 Accrued wages and taxes Accounts payable Notes payable s 24 30 $114 3 175 $247 Total $129 $104 Fixed assets Gross plant and equipment Lesst Depreciation Long-term debt: Stockholders equity $208 7S36Preferred stock (3 million shares) 3 Common stock and paid-in surplus Net plant and equipment Other long-term assets $133 $153 (24 million shares) Retained earnings Total $153$171 Total $260 105 Total assets $400$300Total liabilities and equity $400 $300 LAKE OF EGYPT MARINA, INC Income Statement for Years Ending December 31, 2018 and 2017 (in millions of dollars) 2018 2017 Net sales (all credit) Lesst Cost of goods sold Gross profits Less: Other operating expenses Earnings before interest, taxes, depreciation, and 650 260 $ 390 $500 190 s 310 338 299 260 amortization (EBITDA) Lesss Depreciation Earnings before interest and taxes (EBIT) Lessi Interest Earnings before taxes (EBT) Lessi Taxes Net income Lessi Preferred stock dividends Net income available to common stockholders Less: Common stock dividends Addition to retained earninga Per (common) share data 275 147 S179 155 S 120 Earnings per share (EPS Dividends per share (DPS) Book value per share (BVPS) Market value (price) per share (MVPS) $ 7.460 s 1.000 10.710 s 6.000 S 1.000 4.250 $13.000 $15.200 Construct the DuPont ROA and ROE breakdowns for Lake of Egypt Marina, Inc. (Do not round intermediate calculations. Round your answers to 2 decimal places.) DuPont Analysis ROA ROE

Answer 1

Profit Margin = Net Income / Net Sales
Profit Margin = $182 million / $650 million
Profit Margin = 28.00%

Total Assets Turnover = Net Sales / Total Assets
Total Assets Turnover = $650 million / $400 million
Total Assets Turnover = 1.63

Equity Multiplier = Total Assets / Total Equity
Equity Multiplier = $400 million / $260 million
Equity Multiplier = 1.54

Return on Asset = Profit Margin * Total Assets Turnover
Return on Asset = 28.00% * 1.63
Return on Asset = 45.64%

Return on Equity = Profit Margin * Total Assets Turnover * Equity Multiplier
Return on Equity = 28.00% * 1.63 * 1.54
Return on Equity = 70.29%