Balance Sheet Data Cash Accounts receivable Inventory Current assets Net fixed assets i Total assets Accounts payable Accruals Notes payable Current liabilities Long-term debt Total liabilities Common stock Retained earnings Total equity $11,200,000 Total debt and equity $11,200,000 $800,000 1,600,000 2,400,000 4,800,000 $960,000 320,000 1,280,000 2,560,000 4,160,000 6,720,000 1,120,000 3,360,000 4,480,000 6,400,000 Income Statement Data Sales Cost of goods sold Gross profit Operating expenses EBIT Interest expense EBT Taxes Net income If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the turnover ratio, and the $16,000,000 8,000,000 8,000,000 4,000,000 4,000,000 652,800 3,347,200 836,800 $2,510,400 the total asset And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratio provide insights into the company's effectiveness in using the company's assets, and 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. Pavo Media Systems Inc. DuPont Analysis 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. Pavo Media Systems Inc. DuPont Analysis Ratios Profitability ratios Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Return on equity (%) Value 50.00 20.92 22.41 53.52 Correct/Incorrect Ratios Ratios Asset management ratio Total assets turnover Financial ratios Equity multiplier Do not round intermediate calculations and round your final answers up to two decimals. Pavo Media Systems Inc. DuPont Analysis Calculation Value AKIRA: OK, it looks like I've got a couple of incorrect values, so show me your calculations, and then we can talk strategies for improvement. 1.43 YOU: I've just made rough calculations, so let me complete this table by inputting the components of each ratio and its value: Value 1.67 Correct/Incorrect Ratios Profitability ratios Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Return on equity (%) Asset management ratio Total assets turnover Financial ratios Equity multiplier Calculation Numerator Denominator Check all that annly.. Value AKIRA: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Emma 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 Pavo's ROE. 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
