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 2 x Fixed assets turnover 5 x Debt-to-capital ratio 18 % Total assets turnover 3 x 3.50% 10.50% 14.10% 14.30% Times interest earned 4x Profit margin EBITDA coverage 7 x Return on total assets Inventory turnover 8 x Return on common equity Days sales 17 days Return on invested outstandinga capital a calculation is based on a 365-day year. Balance Sheet as of December 31, 2021 (millions of dollars) Cash and equivalents $ 86 Accounts payable Accounts receivables 57 Other current liabilities Inventories 157 Notes payable Total current assets $ 300 Total current liabilities $ 52 14 48 $ 114 Long-term debt 24 Total liabilities $ 138 Gross fixed assets 252 Common stock 114 Less depreciation 77 223 Net fixed assets $ 175 Retained earnings Total stockholders' equity Total liabilities and equity $ 337 Total assets $ 475 $ 475 Income Statement for Year Ended December 31, 2021 (millions of dollars) Net sales $ 815.00 690.00 Cost of goods sold Gross profit $ 125.00 Selling expenses 67.50 EBITDA $ 57.50 12.00 Depreciation expense Earnings before interest and taxes (EBIT) $ 45.50 5.50 Interest expense Earnings before taxes (EBT) Taxes (25%) $ 40.00 10.00 Net income $ 30.00 a. Calculate the following ratios. Do not round intermediate calculations. Round your answers to two decimal places. Firm Industry Average Current ratio 2x Debt to total capital % 18% Times interest earned 4 x EBITDA coverage 7 x Inventory turnover 8 x Days sales outstanding days 17 days Fixed assets turnover 5 x Total assets turnover 3 Profit margin % 3.50 % Return on total assets % 10.50 % Return on common equity % 14.10 % Return on invested capital % 14.30 % b. Construct a DuPont equation, and the industry. Do not round intermediate calculations. Round your answers to two decimal places. Firm Industry Profit margin % 3.50% NE Total assets turnover x 3x Equity multiplier X c. Do the balance sheet accounts or the income statement figures seem to be primarily responsible for the low profits? I. The low ROE for the firm is due to the fact that the firm is utilizing more debt than the average firm in the industry and the low ROA is mainly a result of an excess investment in assets. II. The low ROE for the firm is due to the fact that the firm is utilizing less debt than the average firm in the industry and the low ROA is mainly a result of an lower than average investment in assets. III. Analysis of the extended Du Pont equation and the set of ratios shows that the turnover ratio of sales to assets is quite low; however, its profit margin compares favorably with the industry average. Either sales should be higher given the present level of assets, or the firm is carrying more assets than it needs to support its sales. IV. Analysis of the extended Du Pont equation and the set of ratios shows that the turnover ratio of sales to assets is quite low; however, its profit margin compares favorably with the industry average. Either sales should be lower given the present level of assets, or the firm is carrying less assets than it needs to support its sales. V. Analysis of the extended Du Pont equation and the set of ratios shows that most of the Asset Management ratios are below the averages. Either assets should be higher given the present level of sales, or the firm is carrying less assets than it needs to support its sales. -Select- d. Which specific accounts seem to be most out of line relative to other firms in the industry? 1. The accounts which seem to be most out of line include the following ratios: Current, EBITDA Coverage, Inventory Turnover, Days Sales Outstanding, and Return on Equity. II. The accounts which seem to be most out of line include the following ratios: Debt to Total Capital, Inventory Turnover, Total Asset Turnover, Return on Assets, and Profit Margin. III. The accounts which seem to be most out of line include the following ratios: Times Interest Earned, Total Asset Turnover, Profit Margin, Return on Assets, and Return on Equity. IV. The accounts which seem to be most out of line include the following ratios: Inventory Turnover, Days Sales Outstanding, Fixed Asset Turnover, Profit Margin, and Return on Equity. V. The accounts which seem to be most out of line include the following ratios: Inventory Turnover, Days Sales Outstanding, Total Asset Turnover, Return on Assets, and Return on Equity. -Select