This exercise is based on the Peabody Toys, Inc., data from E 4–27.

Required:
1. Determine the following components of the DuPont framework for 2021:
a. Profit margin on sales

b. Asset turnover
c. Equity multiplier
d. Return on equity
2. Write an equation that relates these components in calculating ROE. Use the Peabody Toys data to show that the equation is correct.

E 4–27

Transcribed Image Text:

(S in thousands) 2021 2020 Income statement information Net sales $5,200 180 $4,200 Net income 124 Balance sheet information Current assets $ 800 $ 750 Property, plant, and equipment (net) 1,100 950 Total assets $1,900 $1,700 $ 600 750 Current liabilities $ 450 Long-term liabilities Common stock Retained earnings 750 400 400 150 100 Liabilities and shareholders' equity $1,900 $1,700