Balance Sheet Data Income Statement Data Cash $700,000 Accounts payable Sales $840,000 280,000 $14,000,000 7,000,000 Accounts receivable 1,400,000 Accruals Cost of goods sold Inventory Notes payable 2,100,000 4,200,000 1,120,000 2,240,000 Gross profit Operating expenses 7,000,000 3,500,000 Current assets Current liabilities Long-term debt 3,640,000 EBIT 3,500,000 Total liabilities 5,880,000 Interest expense 571,200 2,928,800 Common stock 980,000 EBT Net fixed assets 5,600,000 Retained earnings Taxes 732,200 2,940,000 3,920,000 Total equity Net income $2,196,600 Total assets $9,800,000 Total debt and equity $9,800,000 , 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 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. Hydra Cosmetics Inc. DuPont Analysis Ratios Value Correct/Incorrect Ratios Value Correct/Incorrect Asset management ratio 50.00 Total assets turnover 1.43 Profitability ratios Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Return on equity (%) 20.92 22.41 Financial ratios 53.52 Equity multiplier 1.67 LANDON: 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. Hydra Cosmetics Inc. DuPont Analysis Ratios Calculation Value Numerator Denominator = Profitability ratios Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Return on equity (%) = Asset management ratio Total assets turnover Financial ratios Equity multiplier Hydra Cosmetics Inc. DuPont Analysis Ratios Calculation Value Numerator Denominator = Profitability ratios Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Return on equity (%) = / = / = Asset management ratio Total assets turnover Financial ratios Equity multiplier LANDON: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Amelia 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 Hydra'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. Use more debt financing in its capital structure and increase the equity multiplier. 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 company's 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 company's total assets turnover