Question

Return on Investment, Financial Leverage, and DuPont Analysis The following tables provide information from the recent annual reports of HD Rinker, AG. Balance sheets 2016 2015 2014 2013 Total assets € 6,108 € 6,451 € 7,173 € 6,972 Total liabilities 5,970 4,974 4,989 5,097 Total shareholders' equity 138 1,477 2,184 1,875 Income statements 52 weeks ended 2016 2015 2014 Sales revenue € 10,364 € 9,613 € 8,632 Earnings before interest and taxes 1,473 1,459 887 Interest expense 246 208 237 Earnings before income taxes 1,227 1,251 650 Income tax expense 377 446 202 Net earnings €850 € 805 € 448 a. Calculate HD Rinker's return on equity (ROE) for fiscal years 2016, 2015, and 2014. Round answers to one decimal place (i.e., 0.2568 = 25.7%). Do not round until your final answer. 2016 2015 2014

Answer 1

Calculation of HD Rinker's Return of Equity
	Net earnings	Shareholder's Equity	ROE		Formula for ROE= Net Income/Shareholder's equity
	Amount($)
2016	850	138	615.9
2015	805	1477	54.5
2014	448	2184	20.5
Calculation of HD Rinker's Return of Assets and return on financial leverage
	Net earnings	Total Assets	Total Assets of Previous year	Average of assets	ROA	ROFL
	Amount($)	Amount($)	Amount($)			( ROE-ROA)
2016	850	6108	6451	6279.5	13.5	602.4
2015	805	6451	7173	6812	11.8	42.7
2014	448	7173	6972	7072.5	6.3	14.2
ROA formula= Net earnnings/ Average of assets
Calculation of HD Rinker's Net profit margin, asset turnover and financial leverage
	NPM	AT	FL	ROE using dupont model
2016	8.2	1.7	44.3	599.1
2015	8.4	1.4	4.4	51.6
2014	5.2	1.2	3.3	20.8
Here the ROE is in icrease mode from 2014 to 2015 and 2015 to 2016 because the company profits are increasing and
the revenue on assets are more and equity of the company is decrease from 2014 to 2016 every year. Since every year
the shareholder's equity decrease the FL increase.