An analysis of company performance using DuPont analysis theaf of papers in her hand, your friend and colleague, Chloe, steps into your office and asked the following. CHLOE: Do you have 10 or 15 minutes that you can spare? YoU: Sure, I've got a meeting in an hour, but 1 don't want to start something new and then be interrupted by the meeting, so how can 1 help? CHL.OE: I've been reviewing the company's financial statements and lookang for ways to improve our performance, in general, and the company's retum on equity, or ROE, in particular. Enc, my new team leader, suggested that I start by using a DuPont 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 Eric 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 financal statements and to remember what I know about the Dupont analysis. If tremember correctly, the DuFont equation breaks down our RoE into three component matiost the tirnover ratio, and the And, according to my understanding of the Dufont equation and its calculation of ROC, the three ratios provide insights into the company's Zefiectiveness in using the company's assets, and Mord, let's see your notes with you ratios, and then we can fafk about poswble strategies that will amprove the ratios. I'm going to check the box to the side of yoia calculated yalue if your calculabon is correct and leave it unchecked if your calculation is incocrect. Now, let's see your notes with your ratios, and then we can talk about possible strategies that wall 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. Hydra Cosmetics Inc. DuPont Analysis CHt OEt OK, it looks like I've got a couple of incorrect values, so show me-your calculations, and then we can talk strategies for imprevement. Yous IVe just made tough calculations, so let me complete this table by inputting the components of eash ratio and its value: Hydra Casmetics Inc. DuPont Analysis CHLOE: I see what t did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassmenti Eric would have been very desappointed in me if T had showed him my onginat work. So, naw let's switch topics and ideotify general strategies that could be used to positively affect Hydra's ROE. YOU: OK, so given your knowiedge of the camponent rabos used in the Duftont equation, which of the following strategies should. YOU: OK, so given your knowledge of the component ratios used in the Dupont equation, which of the following strategies should improve the company's ROE? Check all that apply. Use more equity financing in its capital structure, which will increase the equity multiplier. Increase the efficiency of its assets so that it generates more sales with each dellar of asset investment and increases the company's total assets turnover. Increase the cost and amount of assets necessary to generate each dollar of sales because it will increase the company's total assets tumover. Use more debt finanong in its copital structure and increase the equity multipliec: CHLOF: 1 thinkI understand now. Thanks for taking the time to 90 over this with me, and let me know when I can retum the favor