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.


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