A sheaf of papers in his hand, your friend and colleague, Landon, steps into your office and asked the following. LANDON: Do you have 10 or 15 minutes that you can spare? YOU: Sure, I've got a meeting in an hour, but I don't want to start something new and then be interrupted by the meeting, so how can help? LANDON: I've been reviewing the company's financial statements and looking for ways to improve our performance, general and the company's return on equity, or ROE, in particular Amela, my new team leader, suggested that I start by using a analysis, and I'd like to run my numbers and conclusions by you to see whether I've missed anything. Here are the balance sheet and income statement data that Amelia gave me and here are my notes with my calculations. Could you start by making sure that my numbers are correct? : Give me a minute to look at these financial statements and to remember what I about the DuPont analysis

HELP!!!!

8. An analysis of company performance using DuPont analysis A sheat of papers in his hand, your friend and colleague, Landon, steps into your office and asked the following. LANDON: Do you have 10 or 15 minutes that you can spare? YOU. Sure, I've got a meeting in an hour, but I don't want to start something new and then be Interrupted by the meeting, so how can I help? LANDON: T've been reviewing the company's financial statements and looking for ways to improve our performance, in general and the company's return on equity, or ROE, in particular. Amella, my new team leader suggested that I start by using a Dupont analysis, and I'd like to run my nymbers and conclusions by you to see whether I've missed anything. Here are the balance sheet and income statement data that Amelia gave me, and here are my notes with my calculations Could you start by making sure that my numbers are correct? You give me a minute to look at these financial statements and to remember what I know about the Dupont analysis. Balance Sheet Data Income Statement Data Cash $1,200,000 Accounts receivable 2,400,000 Inventory 3,600,000 Current assets 7,200,000 Accounts payable Accruals Notes payable Current liabilities Long-term debt Total laborities Common stock Retained earnings Total equity Total debt and equity EBIT $1,440,000 480,000 1,920,000 3,840,000 6,240,000 10,080,000 1,680,000 5,040,000 6,720,000 $16,800,000 Sales $24,000,000 Cost of goods sold 12,000,000 Gross profit 12,000,000 Operating expenses 6,000,000 6,000,000 Interest expense 979,200 EBT 5,020,800 Taxes 1,255,200 Net Income $3,765,600 Net fixed assets 9,600,000 Total assets $16,800,000 If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the net profit margin turnover ratio, and the equity multiplier the total asset And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratios provide insights into the company's management of its sales and share price, effectiveness in using the company's assets, and management of its liquidity and its tax records Now, let's see your notes with your ratios, and then we can talk about possible strategies that will improve the ratios. I'm going to check the box to the side of your calculated value if your calculation is correct and leave it unchecked if your calculation is incorrect: Cepeus Manufacturing Inc. DuPont Analysis Value Correct/Incorrect Value Correct/Incorrect Ratios Asset management ratio Total assets turnover 50.00 Correct 1.43 Ratios Profitability ratios Gross profit margin (0%) Operating profit margin (9) Net profit margin (9) Return on equity (9) 20.92 Incorrect Corred 22.43 53.52 Financial ratios Equity multiple 1.67 Cepeus Manufacturing Inc. DuPont Analysis Ratios Calculation Value Numerator Denominator = Profitability ratios Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Return on equity (%) Asset management ratio Total assets turnover 11 I 11 Financial ratios Equity multiplier embarrassment! Amelia would have been very disappointed in me if I had showed her my original work. So, now let's switch topics and identify general strategies that could be used to positively affect Cepeus's ROE. YOU: OK, so given your knowledge of the component ratlos used in the DuPont equation, which of the following strategies should Improve the company's ROE? Check all that apply. Increase the firm's bottom-line profitability for the same volume of sales, which will increase the company's net profit margin. Reduce the company's operating expenses, its cost of goods sold, and/or the interest rate on its borrowed funds because this will increase the company's net profit margin. Increase the efficiency of its assets so that it generates more sales with each collar of asset investment and increases the company's total assets turnover Decrease the company's use of debt capital because it will decrease the eculty moltiolet