Business, 22.04.2020 02:31 milkshakegrande101

The DuPont equation shows the relationships among asset management, debt management, and ratios. Management can use the DuPont equation to analyze ways of improving the firm's performance. Its equation is:
Ratio analysis is important to understand and interpret financial statements; however, sound financial analysis involves more than just calculating and interpreting numbers. factors also need to be considered.

Quantitative Problem: Rosnan Industries' 2018 and 2017 balance sheets and income statements are shown below.

Balance Sheets:
2018 2017
Cash and equivalents $60 $45
Accounts receivable 275 300
Inventories 375 350
Total current assets $710 $695
Net plant and equipment 2,000 1,490
Total assets $2,710 $2,185
Accounts payable $150 $85
Accruals 75 50
Notes payable 110 135
Total current liabilities $335 $270
Long-term debt 450 290
Common stock 1,225 1,225
Retained earnings 700 400
Total liabilities and equity $2,710 $2,185
Income Statements:
2018 2017
Sales $2,000 $1,500
Operating costs excluding depreciation 1,250 1,000
EBITDA $750 $500
Depreciation and amortization 100 75
EBIT $650 $425
Interest 62 45
EBT $588 $380
Taxes (40%) 235 152
Net income $353 $228
Dividends paid $53 $48
Addition to retained earnings $300 $180
Shares outstanding 100 100
Price $25.00 $22.50
WACC 10.00%

What is the firm’s 2018 current ratio?

What is the firm’s 2018 net profit margin?

What is the firm’s 2018 price/earnings ratio?

Answers: 3

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The DuPont equation shows the relationships among asset management, debt management, and ratios. Man...

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