Question
Check all that apply. 1.Decrease the amount of debt financing used by the company, which will decrease the total asset turnover ratio. 2. Decrease the
Check all that apply.
1.Decrease the amount of debt financing used by the company, which will decrease the total asset turnover ratio.
2. Decrease the companys use of debt capital because it will decrease the equity multiplier.
3. Increase the interest rate on its notes payable or long-term debt obligations because it will reduce the companys net profit margin.
4. Increase the efficiency of its assets so that it generates more sales with each dollar of asset investment and increases the companys total asset turnover.
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 | 1,025,080 |
Total equity | $3,920,000 | Net income | $1,903,720 | ||
Total assets | $9,800,000 | Total debt and equity | $9,800,000 |
Hydra Cosmetics Inc. DuPont Analysis | |||||
---|---|---|---|---|---|
Ratios | Value | Correct/Incorrect | Ratios | Value | Correct/Incorrect |
Profitability ratios | Asset management ratio | ||||
Gross profit margin (%) | 50.00 | ? | Total asset turnover | 1.43 | ? |
Operating profit margin (%) | 20.92 | ? | ? | ||
Net profit margin (%) | 19.43 | ? | Financial ratios | ? | |
Return on equity (%) | 46.35 | ? | Equity multiplier | 1.67 | ? |
Hydra Cosmetics Inc. DuPont Analysis Calculation Value Profitability ratios Numerator Denominator Gross profit margin (%) / = / = Operating profit margin (%) Net profit margin (%) / = Return on equity (%) / = Asset management ratio II Total asset turnover Financing ratios Equity multiplier / =
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