Balance Sheet Data Income Statement Data Cash $1,300,000 Accounts payable $1,560,000 Sales Accounts receivable. 2,600,000 Accruals 520,000 Cost of goods sold Inventory 3,900,000 Notes payable 2,080,000 Gross profit Current assets 7,800,000 Current liabilities 4,160,000 Operating expenses Long-term debt 6,760,000 EBIT Total liabilities 10,920,000 Interest expense Common stock 1,170,000 EBT Taxes Net fixed assets 7,800,000 Retained earnings 3,510,000 Total equity 4,680,000 Net Income Total assets $15,600,000 Total debt and equity $15,600,000 the total asset If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the turnover ratio, and the And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratios provide insights into the company's effectiveness in using the company's assets, and $26,000,000 13,000,000 13,000,000 6,500,000 6,500,000 1,060,800 5,439,200 1,359,800 $4,079,400 down our ROE into three component ratios: the gross profit margin equation and its calculation of ROE, the three rati net profit margin the total asset the company's If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the turnover ratio, and the And, according to my u equity multiplier DuPont equation and its calculation of ROE, the three ratios provide effectiveness in using the company's assets, and equity ratio. effectiveness in using the company's assets, and use of debt versus equity financing management of its sales and share price and then we can talk about possible strategies that will improves your calculated varde in your conculation is correct and leave it unchecked if your calculation is in DIG TO effectiveness in using the company's assets, and n we can talk about possible strategies that will improve the ra is correct and leave it unchecked if your calculation is incorred control over its expenses management of its liquidity and its tax records Canis Major Veterinary Supplies 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. Canis Major Veterinary Supplies Inc. DuPont Analysis Ratios Value Correct/Incorrect Ratios Value Correct/Incorrect Profitability ratios Asset management ratio. Gross profit margin (%) 50.00 Total assets turnover 1.67 Operating profit margin (%) 20,92 Net profit margin (%) 26.15 Financial ratios Return on equity (%)) 62.45 Equity multiplier 1.43 MADISON: 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. YOU: I've just made rough calculations, so let me complete this table by inputting the components of each ratio and its value: Do not round intermediate calculations and round your final answers up to two decimals. Canis Major Veterinary Supplies Inc. DuPont Analysis Ratios Calculation Value Profitability ratios Numerator Denominator Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Return on equity (%) Asset management ratio Total assets turnover Financial ratios Equity multiplier 7 7 MADISON: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Xavier would have been very disappointed in me if I had showed him my original work. So, now let's switch topics and identify general strategies that could be used to positively affect Canis Major'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? Check all that apply. Increase the interest rate on its notes payable or long-term debt obligations because it will reduce the company's net profit margin. Decrease the amount of debt financing used by the company, which will decrease the total assets turnover ratio. Decrease the company's use of debt capital because it will decrease the equity multiplier 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. MADISON: I think I understand now. Thanks for taking the time to go over this with me, and let me know when I can return the favor