Required

1. For the years 20X2 and 20X1, conduct the DuPont Analysis and calculate the Return of Equity (ROE) for ?Megasales Company?. (Please show the analytical computations for all components of the DuPont Analysis for the two respective years).

2. For the years 20X2 and 20X1, compute the Return of Equity (ROE) for ?Megasales Company?. Analyze and interpret your results for the two years under examination.

3. Describe how each of the three components of the DuPont Analysis, affects the change in the Return of Equity (ROE) from 20X1 to 20X2. How does the level of debt affect the level of ROE??

4. What are the possible limitations of the ROE analysis as far as profitability is concerned?

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Below, you can find the comparative Financial Statement of < Company (in thousands of €) for the years 20X2 and 20X1: Comparative Balance Sheet "Megasales Company" Assets Fixed Assets: Property, Plant and Equipment Other Assets Total Fixed Assets Current Assets: Cash and Cash Equivalents Accounts Receivables Inventory Prepaid Expenses Total Current Assets Total Assets 20X2 56,786 21,352 78,138 1,627 14,086 15,692 935 32,340 110,477 20X1 60,000 22,000 82,000 1,800 17,000 15,200 1,143 35,143 117,143 Liabilities & Stockholders' Equity Stockholders' Equity: Common Stock Preferred Stock Retained Earnings Total Stockholders' Equity Long-Term Liabilities Long-Term Debt Deferred Tax Liabilities Other Long-Term Liabilities Total Long-Terin Liabilities Current Liabilities Short-Term Debt Accounts Payable Accrual Liabilities Advances Received Accrued Tax Payable Total Current Liabilities Total Liabilities Total Liabilities and Stockholders' Equity 20X2 48,777 6,000 11,509 66,286 24,700 532 3,934 29,166 3,950 5,810 1,478 2,173 1,614 15,025 44,191 110,477 20X1 55,000 6,000 15,143 76,143 26,000 700 2,000 28,700 4,100 5,200 1,250 380 1,370 12,300 41,000 117,143 The reported Income Statement for 20X2 and 20X1 is the following (in thousands of €): Comparative Income Statement of "Megasales Company" 20X2 103,683 (72,070) 31,613 (2,991) (6,021) (11,012) 20,601 Sales Cost of Goods Gross Margin Research and Development General and Administrative Expenses Operating Expenses Operating Income Interest Expense Income Before Taxes Provision for Taxes Net Income (3.578) 17,023 Preferred Dividends 20X2¹ Preferred Dividends 20X1 (4,579) 12,444 Total Assets 20X0 Total Stockholders' Equity 20X0 20X1 113,127 (88,975) 24,152 (1,438) (13,089) (14,527) 9,625 Additional Information (amounts in thousands of €) 40 0 132,372 72,000 Moreover, the table below summarizes some necessary additional information for the years under examination: (2,434) 7,191 (1,991) 5,200 Below, you can find the comparative Financial Statement of < Company (in thousands of €) for the years 20X2 and 20X1: Comparative Balance Sheet "Megasales Company" Assets Fixed Assets: Property, Plant and Equipment Other Assets Total Fixed Assets Current Assets: Cash and Cash Equivalents Accounts Receivables Inventory Prepaid Expenses Total Current Assets Total Assets 20X2 56,786 21,352 78,138 1,627 14,086 15,692 935 32,340 110,477 20X1 60,000 22,000 82,000 1,800 17,000 15,200 1,143 35,143 117,143 Liabilities & Stockholders' Equity Stockholders' Equity: Common Stock Preferred Stock Retained Earnings Total Stockholders' Equity Long-Term Liabilities Long-Term Debt Deferred Tax Liabilities Other Long-Term Liabilities Total Long-Terin Liabilities Current Liabilities Short-Term Debt Accounts Payable Accrual Liabilities Advances Received Accrued Tax Payable Total Current Liabilities Total Liabilities Total Liabilities and Stockholders' Equity 20X2 48,777 6,000 11,509 66,286 24,700 532 3,934 29,166 3,950 5,810 1,478 2,173 1,614 15,025 44,191 110,477 20X1 55,000 6,000 15,143 76,143 26,000 700 2,000 28,700 4,100 5,200 1,250 380 1,370 12,300 41,000 117,143 The reported Income Statement for 20X2 and 20X1 is the following (in thousands of €): Comparative Income Statement of "Megasales Company" 20X2 103,683 (72,070) 31,613 (2,991) (6,021) (11,012) 20,601 Sales Cost of Goods Gross Margin Research and Development General and Administrative Expenses Operating Expenses Operating Income Interest Expense Income Before Taxes Provision for Taxes Net Income (3.578) 17,023 Preferred Dividends 20X2¹ Preferred Dividends 20X1 (4,579) 12,444 Total Assets 20X0 Total Stockholders' Equity 20X0 20X1 113,127 (88,975) 24,152 (1,438) (13,089) (14,527) 9,625 Additional Information (amounts in thousands of €) 40 0 132,372 72,000 Moreover, the table below summarizes some necessary additional information for the years under examination: (2,434) 7,191 (1,991) 5,200

Answer rating: 100% (QA)

As per Du point analysis Return on equity Net profit marginTotal assets turnoverequity mulitiplier N... View the full answer