Question

Qucstion 2: DuPont method In year 2016, Apple Inc. had profit margin of 27.8% a) The profit margin indicates that Apple has t generated 27.8 cents of profit per dollar of sales and asset turnover of 670 Le t generated 57 cents of annual sales per do ar o e as O high pricing power it can charge high prices relative to costs O high production efficiency-it has very low costs Olow pricing power it cannot charge high prices relative to costs O extremely efficient in generating assets per dollar of sales O relatively inefficient in generating sales per dollar of assets O extremely efficient in generating sales per dollar of assets The asset turnover indicates that Apple is b) Compute Apple's return on investment (RoI) if your answer is 15.3%, enter 15.3 without the percent sign; round your answer to one digit after the decimal pont, .e, enter 15.3 not 15 or 1532 % c) Huawel Technologles is a major manufacturer of low-cost Androld phones. Think about Apple vs Huawel. Which company likely has higher profit margin? O Apple OHuawel which company likely has higher asset turnover? ○ Apple O Huawei

Answer 1

a	The Profit margin indicates that Apple has a High Pricing Power - It can charge high prices relative to costs
	So Option A
	Asset Turnover indicates that Apple is extremely efficient in generating sales per dollar of asset
	So Option C
b	ROI = Net operating income / Average Invested Assets
	In this case both the above figures are not given, However they are given in the form of Profit margin and Asset turnover respectively
	So ROI = (27.80 / 67.00)*100 = 41.50%
c	Huawaei Technology is manufacturer of low-cost android phone, hence its marketing strategy is completely different from that of Apple
	It means that it can' not charge a very high price for its product due to its low cost of production and hence its profit margin and Asset Turnover will be less
	Hence in both the cases Apple will have a higher profit margin and higher asset turnover