Balance Sheet Data Income Statement Data Cash Accounts payable Sales Accounts receivable Accruals $1,300,000 2,600,000 3,900,000 7,800,000 Inventory Notes payable Current assets Current liabilities Long-term debt $1,560,000 520,000 2,080,000 4,160,000 6,760,000 10,920,000 1,170,000 3,510,000 4,680,000 $15,600,000 Cost of goods sold Gross profit Operating expenses EBIT Interest expense EBT Taxes Net income $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 Total liabilities Common stock Net fixed assets 7,800,000 Retained earnings Total equity Total debt and equity Total assets $15,600,000 net profit margin , the total asset If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the turnover ratio, and the equity multiplier . And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratios provide insights into the company's shareholder and dividend management , effectiveness in using the company's assets, and control over its expenses 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 Total assets turnover 1.67 Operating profit margin (%) Net profit margin (%) Return on equity (%) 20.92 26.15 Financial ratios 62.45 Equity multiplier 1.43 Ratios Value Calculation 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 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 efficiency of its assets so that it generates more sales with each dollar of asset investment and increases the company's total assets turnover. O Use more equity financing in its capital structure, which will 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. Increase the cost and amount of assets necessary to generate each dollar of sales because it will increase the company's total assets turnover