Question: Suppose that an analyst has noticed that the return on equity of the XYZ Company has declined from 2012 to 2013. (millions) 2013 2012 Sales
Suppose that an analyst has noticed that the return on equity of the XYZ Company has declined from 2012 to 2013.
| (millions) | 2013 | 2012 |
| Sales | $1,000 | $900 |
| Earnings before interest and taxes | $400 | $380 |
| Interest expense | $30 | $30 |
| Taxes | $100 | $90 |
| Total assets | $2,000 | $2,000 |
| Shareholders equity | $1,250 | $1,000 |
Fill in the following table (please show detailed calculations for each ratio, including the formula used, below that table):
2013 2012
Return on equity
Return on assets
Financial leverage ratio
Total asset turnover
Net profit margin
Operating profit margin
b.Using the DuPont formula, explain the source of this decline.
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