Question

I need step by step of how you solved the problems. Add, subject, divide or multiply however you came to your totals.

3-30 calculate the following ratios for Lake of Egypt Marina, Inc, as of yearend 2015. (LG3 – 1 through LG3-5)

Lake of Egypt Marines, Inc.                       Industry

Current ratio                                     2.00 times

Quick ratio                                                1.20 times

Cash ratio                                         0.25 times

Inventory turnover                             3.60 times

Days’ salary in inventory                    101.39 days

Average collection period                   32.50 days

Average payment period                    45.00 days

Fixed asset turnover                          1.25 times

Sales to working capital                     4.25 times

Total asset turnover                          0.85 times

Capital intensity                                 1.18 times

Debt ratio                                          62.50%

Debt to equity                                   1.67 times

Equity multiplier                                 2.67 times

Times interest earned                        8.50 times

Cash coverage                                  8.75 times

Profit margin                                     28.75%

Gross profit margin                           56.45%

Operating profit margin                      46.78%

Basic earning power                          32.50%

ROA                                                 19.75%

ROE                                                 36.88%

Dividend payout                                35.00%

Market to book ratio                          2.55 times

PE ratio                                            15.60 times

3-31 DuPont Analysis Construct the DuPont ROA and ROE breakdown for Lake of Egypt Marina, Inc. (LG3-6)

               

Answer 1

3-31)

According to DuPont model:

Return on Asset = Net profit margin * Total asset turnover

and further ,

Return on Equity = Return on Asset*Equity Multiplier

since the Net profit margin ratio and total asset turnover ratio has been given in the question , using those values , we can calculate Return on Asset

Then to calculate Return on equity , we will use the above calculated Return on asset and the equity multiplier ratio to get the answer