Question

1. The DuPont equations for a particular company and the industry in which it operates are listed below: Company Industry ROE 28.59% 20.09% = = = PM 5.80% 6.20% X X X AT X 2.9 X 2.4 x EM 1.7 1.35 Which of the following statements is TRUE? A termulsos o nime more a. The ROA for the company is 16.82%. b. The industry's debt ratio is higher. c. On a percentage basis, the company is more profitable (that is, it has better control of their expenses relative to its revenues than does the industry). d. The industry has a 12.88% return on its assets. e. The industry's assets are more productive than the company's assets.

Answer 1

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He e 9 w av J* ENG 00-23 06-02-20207 DV722iXfx DR DS DT 701 DU DV I DW DD DY DZ EA EE - ROA = PM X ASSETS TURNOVER ROA FOR COMPANY = 5.80% X 2.9 = 16.82% TRUE 707 EM = EQUITY MULTIPLIER = 1 + DEBT EQUITY RATIO EM FOR COMPANY = 1 + DEBT EQUITY RATIO 1.7 = 1 + DEBT EQUITY RATIO 0.7 = DEBT EQUITY RATIO DEBT RATIO = 0.7/(0.7 +1) = 0.4118 708 709 710 711 712 713 DEBT RATIO FOR INDUSTRY = 0.35/(0.35+1)= 0.2593 FALSE 714 PM (PROFIT MARGIN) IS HIGHER FOR INDUSTRY FALSE 715 716 717 ROA FOR INDUSTRY = 6.20% X 2.4 = 14.88% FALSE 718 COMPANY HAS HIGHER ASSSET TURNOVER THAN INDUSTRY (2.9> 2.4) FALSE 719 720 721 722 SO STATEMENT "a" IS TRUE 723 724 725 ... CASH BUDGET budget 45 days cycle ROE, BV MV ratio VARIANCE BEP, OL FL ratios DETROIT float B-S profit loss SALES BUDGET dupont ... :