Question

Financial statements for Remington Inc. follow.

Remington Inc.
Consolidated Statements of Income
(In thousands except per share amounts)
	2019		2018		2017
Net sales	$7,245,088		$6,944,296		$6,149,218
Cost of goods sold	(5,286,253)		(4,953,556)		(4,355,675)
Gross margin	$1,958,835		$1,990,740		$1,793,543
General and administrative expenses	(1,259,896)		(1,202,042)		(1,080,843)
Special and nonrecurring items	2,617		-		-
Operating income	$701,556		$788,698		$712,700
Interest expense	(63,685)		(62,398)		(63,927)
Other income	7,308		10,080		11,529
Gain on sale of investments	-		9,117		-
Income before income taxes	$645,179		$745,497		$660,302
Provision for income taxes	(254,000)		(290,000)		(257,000)
Net income	$391,179		$455,497		$403,302
Net income per share	$1.08		$1.25		$1.11

Remington Inc.
Consolidated Balance Sheets
(In thousands)
ASSETS		Dec. 31, 2019		Dec. 31, 2018
Current assets:
Cash and equivalents		$320,558		$41,235
Accounts receivable		1,056,911		837,377
Inventories		733,700		803,707
Other		109,456		101,811
Total current assets		$2,220,625		$1,784,130
Property and equipment, net		1,666,588		1,813,948
Other assets		233,792		248,372
Total assets		$4,121,005		$3,846,450
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$250,363		$309,092
Accrued expenses		347,892		274,220
Other current liabilities		15,700		-
Income taxes		93,489		137,466
Total current liabilities		$707,444		$720,778
Long-term debt		$650,000		$541,639
Deferred income taxes		275,101		274,844
Other long-term liabilities		61,267		41,572
Total liabilities		$1,693,812		$1,578,833
Stockholders' equity:
Common and preferred stock		$189,727		$189,727
Additional paid-in capital		114,806		127,776
Retained earnings		2,397,112		2,136,794
		$2,701,645		$2,454,297
Less: Treasury stock, at cost		(274,452)		(186,680)
Total stockholders' equity		$2,427,193		$2,267,617
Total liabilities and stockholders' equity		$4,121,005		$3,846,450

Use the information above and below to respond to the following requirements.

Statement Item		January 1, 2018 (In Millions)
Total assets		$3,485,233
Total stockholders' equity		2,083,122

		Year ended December 31,
Industry Averages		2019		2018
Return on equity		5.31%		12.54%
Profit margin		4.00		6.21
Asset turnover		0.83		1.96
Leverage		1.60		1.03

Required:

Perform a Dupont analysis for 2018 and 2019. Round intermediate calculations to four decimals, if required and your final answers to two decimal places.

	Return on Equity
2019	%
2018	%

Answer 1

Remington inc.

Return on equity (Dupont analysis)

= Net profit margin ratio × Assets turnover × Financial leverage

= Net income/Sales × Sales/Average total assets × Average total assets/Average shareholders equity

Return on equity	%
2019	= (391,179/72,45,088) × {72,45,088/(41,21,005+38,46,450)/2} × {((41,21,005+38,46,450)/2)/(24,27,193+22,67,617)/2} = 0.0540 × 1.8187 × 1.6971 = 16.67%
2018	= (455,497/69,44,296) × {69,44,296/(38,46,450+34,85,233)/2} × {((38,46,450+34,85,233)/2)/(22,67,617+20,83,122)/2} = 0.0656 × 1.8943 × 1.6852 = 20.94%