Question

The following condensed information was reported by Peabody Toys, Inc., for 2021 and 2020: ($ in thousands) 2021 2020 $6,800 330 $5,800 156 Income statement information Net sales Net income Balance sheet information Current assets Property, plant, and equipment (net) Total assets Current liabilities Long-term liabilities Common stock Retained earnings Liabilities and shareholders' equity $ 960 2,540 $3,500 $1,680 910 600 310 $3,500 $ 910 2,190 $3,100 $1,330 910 600 260 $3,100 Required: 1. Determine the following components of the DuPont framework for 2021: 2. Write an equation that relates these components in calculating ROE. Use the Peabody Toys data to show that the equation is correct.

Answer 1

Solution 1) = Choose Numerator Net Income $ 330 1 / / Profit Margin (%) Choose Denominator Net Sales $ 6,800 = = Profit margin Profit margin 4.85% II Choose Numerator Sales $ 6,800 / / / Asset Turnover Choose Denominator Total Assets $ 3,500 Asset Turnover Asset Turnover 1.94 11 Choose Numerator Total Assets $ 3,500 / / / Equity Multiplier Choose Denominator Share holder's Equity $ 910 Equity Multiplier Equity Multiplier 3.85 Solution 2) Profit Margin 4.85% X Asset Turnover 1.94 х Equity Multiplier 3.85 ROE 36.26% X X

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