Analyse why Modern Furnitures? ROE is different from that of the industry using Du Pont Identity and other ratios. The relevant ratios are shown in Exhibit 3.

(30 marks)

Exhibit 3 Relevant Ratios

Ratios

Modern

Industry average

Current ratio

4.11

5.20

Quick ratio

3.20

3.80

Total asset turnover

1.96

1.75

Fixed asset turnover

7.50

7.00

Working capital turnover

9.09

10.45

Inventory turnover

3.60

4.50

FIN303 Assignment 1

SIM UNIVERSITY Assignment 1 ? Page 5 of 5

Ratios

Modern

Industry average

Receivables turnover

10.71

12.42

Payables turnover

4.50

3.90

Gross profit margin

70.00%

60.00%

Operating profit margin

33.33%

38.00%

Net profit margin

25.07%

28.00%

Return on assets

49.15%

50.00%

Return on equity

99.60%

85.00%

Total debt/Total assets

37.58%

32.00%

LTD/Total assets

32.68%

28.00%

LTD/(LTD+Equity)

39.84%

35.00%

Equity multiplier

2.03

1.735

Interest Coverage

16.67

22.10

I require answer for qn 5, its 30 marks..thanks