A firm has been experiencing low profitability in recent years. Perform an analysis of the firm's...

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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 $2 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 3 Fixed assets turnover 9 Debt-to-capital ratio 16% Total assets turnover 4 x Times interest earned 7 x Profit margin 2.25% EBITDA coverage 8 Return on total assets 9.00% Inventory turnover 10 Return on common 16.30% equity Days sales outstanding 17 days Return on invested capital 15.90 % aCalculation is based on a 365-day year. Balance Sheet as of December 31, 2021 (millions of dollars) Cash and equivalents $ 63 Accounts payable $ 38 Accounts receivables 50 Other current liabilities 6 Inventories 117 Notes payable 25 Total current assets $ 230 Total current liabilities $ 69 Long-term debt 19 Total liabilities $ 88 Gross fixed assets 154 Common stock 76 Less depreciation 69 Retained earnings 151 Net fixed assets $ 85 Total stockholders' equity $227 Total assets $ 315 Total liabilities and equity $315 Income Statement for Year Ended December 31, 2021 (millions of dollars) Net sales $ 715.00 Cost of goods sold Gross profit 610.00 $ 105.00 Selling expenses 58.50 EBITDA $ 46.50 Depreciation expense 10.00 Earnings before interest and taxes (EBIT) $ 36.50 Interest expense 3.50 Earnings before taxes (EBT) $ 33.00 Taxes (25%) 8.25 Net income $ 24.75 a. Calculate the following ratios. Do not round intermediate calculations. Round your answers to two decimal places. Current ratio Firm 3.33 Industry Average 3 x Debt to total capital 16% % Times interest earned 7 x 10.43 EBITDA coverage 8 Inventory turnover 10 5.21 Days sales outstanding 17 days 25.52 days Fixed assets turnover 9 8.41 Total assets turnover 4 x 2.27 Profit margin 2.25% 3.46 % Return on total assets 9.00% 7.86 % Return on common equity 16.30% 10.90 % Return on invested capital 15.90% % b. Construct a DuPont equation, and the industry. Do not round intermediate calculations. Round your answers to two decimal places. Firm Industry Profit margin 2.25% 3.46 % Total assets turnover 4x 2.27 Equity multiplier 1.39 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 $2 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 3 Fixed assets turnover 9 Debt-to-capital ratio 16% Total assets turnover 4 x Times interest earned 7 x Profit margin 2.25% EBITDA coverage 8 Return on total assets 9.00% Inventory turnover 10 Return on common 16.30% equity Days sales outstanding 17 days Return on invested capital 15.90 % aCalculation is based on a 365-day year. Balance Sheet as of December 31, 2021 (millions of dollars) Cash and equivalents $ 63 Accounts payable $ 38 Accounts receivables 50 Other current liabilities 6 Inventories 117 Notes payable 25 Total current assets $ 230 Total current liabilities $ 69 Long-term debt 19 Total liabilities $ 88 Gross fixed assets 154 Common stock 76 Less depreciation 69 Retained earnings 151 Net fixed assets $ 85 Total stockholders' equity $227 Total assets $ 315 Total liabilities and equity $315 Income Statement for Year Ended December 31, 2021 (millions of dollars) Net sales $ 715.00 Cost of goods sold Gross profit 610.00 $ 105.00 Selling expenses 58.50 EBITDA $ 46.50 Depreciation expense 10.00 Earnings before interest and taxes (EBIT) $ 36.50 Interest expense 3.50 Earnings before taxes (EBT) $ 33.00 Taxes (25%) 8.25 Net income $ 24.75 a. Calculate the following ratios. Do not round intermediate calculations. Round your answers to two decimal places. Current ratio Firm 3.33 Industry Average 3 x Debt to total capital 16% % Times interest earned 7 x 10.43 EBITDA coverage 8 Inventory turnover 10 5.21 Days sales outstanding 17 days 25.52 days Fixed assets turnover 9 8.41 Total assets turnover 4 x 2.27 Profit margin 2.25% 3.46 % Return on total assets 9.00% 7.86 % Return on common equity 16.30% 10.90 % Return on invested capital 15.90% % b. Construct a DuPont equation, and the industry. Do not round intermediate calculations. Round your answers to two decimal places. Firm Industry Profit margin 2.25% 3.46 % Total assets turnover 4x 2.27 Equity multiplier 1.39