Question: This table has been kicking my butt. I know it doesn't look like it but I've spent hours trying to get the right answers. Thank

This table has been kicking my butt. I know it doesn't look like it but I've spent hours trying to get the right answers. Thank you for any help understanding the problem.

This table has been kicking my butt. I know it doesn't look

like it but I've spent hours trying to get the right answers.

7x A firm has been experiencing low profitability in recent years. Perform an analysis of the firm's financial position using the DuPont equation. The firm has no lease payments but has a $3 million sinking fund payment on its debt. The most recent industry average ratios and the firm's financial statements are as follows: Industry Average Ratios Current ratio 2x Fixed assets turnover 6 x Debt-to-capital ratio 21 % Total assets turnover 3 Times interest earned 5 x Profit margin 4.50% EBITDA coverage Return on total assets 13.50% Inventory turnover 9x Return on common 18.30 % equity Days sales 31 days Return on invested 14.70% outstanding capital Calculation is based on a 365-day year. Balance Sheet as of December 31, 2021 (millions of dollars) Cash and equivalents $ 94 Accounts payable $ 38 Accounts receivables 80 Other current liabilities Inventories Notes payable Total current assets $ 320 Total current liabilities $ 114 Long-term debt Total liabilities $ 147 Gross fixed assets Common stock Less depreciation Retained earnings Net fixed assets $ 150 Total stockholders' equity $323 Total assets $ 470 Total liabilities and equity $ 470 24 146 52 33 221 118 71 205 Income Statement for Year Ended December 31, 2021 (millions of dollars) Net sales $ 775.00 Cost of goods sold 610.00 Gross profit $ 165.00 Selling expenses 89.50 EBITDA 75.50 Depreciation expense 16.00 Earnings before interest and taxes (EBIT) 59.50 Interest expense 7.50 Earnings before taxes (EBT) 52.00 Taxes (25%) 13.00 S $ $ Net income $ 39.00 a. Calculate the following ratios. Do not round intermediate calculations. Round your answers to two decimal places. Firm Industry Average Current ratio 2.807 2x Debt to total capital 9 21 % % Times interest earned 5 x 7.93 EBITDA coverage 9.74 7x Inventory turnover 9x 3.28 Days sales outstanding 111 days 31 days Fixed assets turnover 6x 2.24 Total assets turnover 2.24 Profit margin 5.032 % 4.50% Return on total assets 13.50 % 12.66 % Return on common equity 18.30 % 18.42 % Return on invested capital 9.56 % 14.70% b. Construct a DuPont equation, and the industry. Do not round intermediate calculations. Round your answers to two decimal places. Firm Industry Profit margin % 4.50% X X X X X 3 x Total assets turnover 3 x Equity multiplier X

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!