Question: can you help me with a,b,cd,e ROA 3.0x ROE ROIC 47.0% DUPONT ANALYSIS A firm has been experiemcing low profitability in recent years. Per lease
ROA 3.0x ROE ROIC 47.0% DUPONT ANALYSIS A firm has been experiemcing low profitability in recent years. Per lease payments but has a $2 million sinking fund payment on its debt. The most recent THE Debe Total capital industry average ratios and the finn's financial statements are as follows Industry Average Ratios form an analysis of the firm's financial position using the DuPont equation. The firm has no 4-24 Faed assets turnover 3v Total assets tumover Curent ratio 2o% Profit margin 3 Debe-to-capital catio Times interest eamed Seturn on total assets 128% Return on common equity EBITDA coverage 10x 11.50% Aeturn on invested capital Inventory turnover 24 days Days sales outstanding Calculation is based on a 365 day year. Balance Sheet as of December 31, 2015 (Millions of Dollars) Accounts payable $45 $ 78 Cash and equivalents Accounts receivable Other current liabilities Notes payable Total current liabilities 11 6 159 Inventories $ 85 $303 Total cument assets Long-termm debt Total liabilities 50 $135 114 Common stock Gross fixed assets 225 Retained earnings 201 Less depreciation 78 Total stockholders' equity Total labilities and equity $315 Net fied assets $147 $450 Total assets $450 Income Statement for Year Ended December 31, 2015 (Millions of Dollars) Net sales $795.0 Cost of goods sold 6600 Gross profit $135.0 Selling expenses 73.5 EBITDA $ 61.5 Depreciation expense Eamings before interest and taxes (EBIT Interest expense 12.0 $ 49.5 Eanings before taxes (EBT) 4.5 $ 45.0 Taxes (40%) Net income 18.0 $ 27.0 Calculate the ratios you think would be useful in this analysis. A b. Construct a DuPont equation, and compare the company's ratios to the industry average ratios. c Do the balance sheet accounts or the income statement figures seem to be primarily responsible for the low profits? d. Which specific accounts seem to be most out of line relative to other firms in the industry? e If the firm had a pronounced seasonal sales pattern or if it grew rapidly during the year, how might that affect the validity of your ratio analysis? How might you correct for such potential problems? Net coTe a. Calculate the ratios you think would be useful in this analysis. b. Construct a DuPont equation, and compare the company's ratios to the industry average ratios. Do the balance sheet accounts or the income statement figures seem to be primarily responsible for the low profits? d. Which specific accounts seem to be most out of line relative to other firms in the industry? e. If the firm had a pronounced seasonal sales pattern or if it grew rapidly during the year, how might that affect the validity of your ratio analysis? How might you correct for such potential problems? C
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