Question

9. An analysis of company performance using DuPont analysis Aa Aa Walking down the hall of your office building with a sheaf of papers in his hand, your friend and colleague, Jason, stepped into your office and asked the following Jason Do you have 10 or 15 minutes that you can spare? You Sure, I've got a meeting in an hour, but I don't want to start something new and then be interrupted by the meeting, so how can I help? I've been reviewing the company's financial statements and looking for general ways to improve our performance, in general, and the company's return on equity, or ROE, in particular. Anja, my new team leader, suggested that I start by using a DuPont analysis, and I'd like to run my numbers and conclusions by you, to see if I've missed anything Jason Here are the balance sheet and income statement data that Anja gave me, and here are my notes with my calculations Could you start by making sure that my numbers are correct? You Give me a minute to look at these financial statements and to remember what I know about the DuPont analysis Balance Sheet Data Income Statement Data Cash Accounts receivable Inventory $1,400,000 Accounts payable $1,680,000 Sales $28,000,000 14,000,000 14,000,000 7,000,000 7,000,000 940,800 6,059,200 2,120,720 2,800,000 Accruals 4,200,000 Notes payable 8,400,000 560,000Cost of goods sold 2,240,000 Gross profit 4,480,000 Operating expenses 5,600,000 EBIT Current assets Current liabilities Long-term debt Total liabilities 10,080,000 Interest expense Common stock 1,680,000 EBT 5,040,000 Taxes Net fixed assets 8,400,000 Retained earnings

Answer 1

1-	profit margin, total asset turnover, equity multiplier
2-	profitability and equity used to finance assets
3-
Gross profit margin	correct
operating profit margin	incorrect
net profit margin	incorrect
return on equity	incorrect
total asset turnover	correct
equity multiplier	incorrect
	Numerator	denominator	value
Gross profit margin	14000000	28000000	50.00%
operating profit margin	7000000	28000000	25.00%
net profit margin	3938480	28000000	14.07%
return on equity	3938480	6720000	58.61%
total asset turnover ratio	28000000	16800000	1.67
equity multiplier	16800000	6720000	2.50
1-	no improvement	incorrect
2-	Improvement	correct
3-	no improvement	incorrect
4-	Improvement	correct