Balance Sheet Data				Income Statement Data
Cash	$600,000	Accounts payable	$720,000	Sales	$12,000,000
Accounts receivable	1,200,000	Accruals	240,000	Cost of goods sold	7,200,000
Inventory	1,800,000	Notes payable	960,000	Gross profit	4,800,000
Current assets	3,600,000	Current liabilities	1,920,000	Operating expenses	3,000,000
		Long-term debt	2,400,000	EBIT	1,800,000
		Total liabilities	4,320,000	Interest expense	403,200
		Common stock	720,000	EBT	1,396,800
Net fixed assets	3,600,000	Retained earnings	2,160,000	Taxes	488,880
		Total equity	2,880,000	Net income	$907,920
Total assets	$7,200,000	Total debt and equity	$7,200,000

If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the , the total asset turnover ratio, and the .

And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratios provide insights into the companys , effectiveness in using the companys assets, and .

Now, lets see your notes with your ratios, and then we can talk about possible strategies that will improve the ratios. Im going to check the box to the side of your calculated value if your calculation is correct and leave it unchecked if your calculation is incorrect.

Hydra Cosmetics Inc. DuPont Analysis

Ratios	Value	Correct/Incorrect	Ratios	Value	Correct/Incorrect
Profitability ratios			Asset management ratio
Gross profit margin (%)	40.00		Total assets turnover	1.67
Operating profit margin (%)	11.64
Net profit margin (%)	12.61		Financial ratios
Return on equity (%)	35.17		Equity multiplier	1.67

Do not round intermediate calculations and round your final answers up to two decimals.

Hydra Cosmetics Inc. DuPont Analysis

Ratios	Calculation				Value
Profitability ratios	Numerator		Denominator
Gross profit margin (%)		/		=
Operating profit margin (%)		/		=
Net profit margin (%)		/		=
Return on equity (%)		/		=
Asset management ratio
Total assets turnover		/		=
Financial ratios
Equity multiplier		/		=

Check all that apply.

Increase the firms bottom-line profitability for the same volume of sales, which will increase the companys net profit margin.

Increase the cost and amount of assets necessary to generate each dollar of sales because it will increase the companys total assets turnover.

Increase the efficiency of its assets so that it generates more sales with each dollar of asset investment and increases the companys total assets turnover.

Reduce the companys operating expenses, its cost of goods sold, and/or the interest rate on its borrowed funds because this will increase the companys net profit margin.