Question
Calculate the Du Pont identity for the Prufrock Corporation using the tables referred to in question 2 of this discussion assignment and provide a concise
Calculate the Du Pont identity for the Prufrock Corporation using the tables referred to in question 2 of this discussion assignment and provide a concise interpretation.
PRUFROCK CORPORATION Balance Sheet 2016
Assets | 2016 |
Current Assets | |
Cash | $98 |
Accounts Receivable | 188 |
Inventory | 422 |
Total | $708 |
Fixed Assets | |
Net Plant and Equipment | $2,880 |
Total Assets | $3,588 |
Liabilities and Owners Equity | |
Current Liabilities | |
Accounts Payable | $344 |
Notes Payable | 196 |
Total | $540 |
Long-Term Debt | $457 |
Owners' Equity | |
Common Stock and Paid in Surplus | $550 |
Retained Earnings | 2,041 |
Totals | $2,591 |
Total Liabilities and Owners Equity | $3,588 |
Prufrock Corporation 2016 Income Statement
Sales | $2,311 | |
COGS | 1,344 | |
Depreciation | 276 | |
Earnings Before Interest and Taxes | $691 | |
Interest Paid | 141 | |
Taxable Income | $550 | |
Taxes (34%) | 187 | |
Net Income | $363 | |
Dividends | $121 | |
Addition to Retained earnings | 242 |
Ive already figured out the calculations. They are as followed...
Profit Margin: 15.7% Total Turnover Asset: .64 Equity Multiplier: 1.39
ROE=.157 x.64 x 1.39= .139667= 14%
What I need help with is interpreting the information. What is affecting the ROE? Is it the operating efficiency, asset use efficiency or Financial leverage? Can someone please explain?
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