Balance Sheet Data	Income Statement Data
Cash	$700,000	Accounts payable	$840,000	Sales	$14,000,000
Accounts receivable	1,400,000	Accruals	280,000	Cost of goods sold	7,000,000
Inventory	2,100,000	Notes payable	1,120,000	Gross profit	7,000,000
Current assets	4,200,000	Current liabilities	2,240,000	Operating expenses	3,500,000
		Long-term debt	3,640,000	EBIT	3,500,000
		Total liabilities	5,880,000	Interest expense	571,200
		Common stock	980,000	EBT	2,928,800
Net fixed assets	5,600,000	Retained earnings	2,940,000	Taxes	732,200
		Total equity	3,920,000	Net income	$2,196,600
Total assets	$9,800,000	Total debt and equity	$9,800,000

***Choose correct bolded option***

If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the Net Profit Margin/Operating Profit Margin , the total asset turnover ratio, and the Debt Ratio/Equity Multiplier

And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratios provide insights into the companys Use of debt versus equity financing/ shareholder and dividend management, effectiveness in using the companys assets, and control of expenses/ management of its revenue and deprecation methods.

Now, lets see your notes with your ratios, and then we can talk about possible strategies that will improve the ratios. Im 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.

Ratios	Value	Correct/Incorrect	Ratios	Value	Correct/Incorrect
Profitability ratios			Asset management ratio
Gross profit margin (%)	50.00		Total assets turnover	1.43
Operating profit margin (%)	20.92
Net profit margin (%)	22.41		Financial ratios
Return on equity (%)	53.52		Equity multiplier	1.67

Do not round intermediate calculations and round your final answers up to two decimals.

Hydra Cosmetics 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		/		=

Check all that apply.

Increase the cost and amount of assets necessary to generate each dollar of sales because it will increase the companys total assets turnover.

Decrease the amount of debt financing used by the company, which will decrease the total assets turnover ratio.

Decrease the companys use of debt capital because it will decrease the equity multiplier.

Increase the efficiency of its assets so that it generates more sales with each dollar of asset investment and increases the companys total assets turnover.