1. Compute the following ratios for Holbrook Company for year 2018:

1. Return on Equity (ROE)
2. Return on Assets (ROA)
3. Financial Leverage (FL)
4. Asset Turnover (AT)
5. Profit Margin (PM)

Which of the two ratios from part (1) are used in the disaggregation of ROA? Show your calculations to confirm that the product of these two ratios equals the ROA that you calculated in part 1. (There will be slight differences due to rounding.)

Which of the of three ratios from part (1) are used in the full DuPont disaggregation of ROE? Show your calculations to confirm that the product of these three ratios equals the ROE that you calculated in part (There will be slight differences due to rounding.)

Which of the three ratios in the ROE calculation appear to be driving the overall ROE figure? (By this, I mean, which portion of the calculation appears to have the most influence on the overall ROE figure). How did you determine your answer?

From a management perspective, what is the benefit of the DuPont disaggregation method over the straightforward ROE calculation method? (Your book has a few paragraphs on this. Please be sure to use your OWN words when answering the question).

ACT 5001- Worksheet 5 Module 4 Holbrook Company had the following financial information for years 2017 and 2018. Refer to this information to answer the required and the bonus problem below. Income Statement 2018 2017 $180,000 110,000 $165,000 100,000 Sales Revenue Cost of Goods Sold Gross Profit 70,000 53,300 2,700 14,000 4,000 $10,000 65,000 50,400 Operating expenses Interest expense 2,600 12,000 3,000 $9,000 Income before income tax Income tax expense Net Income Balance Sheet 2018 2017 $22,000 19,000 $16,000 17,000 Cash Accounts Receivable (net) Investments (short-term) Inventory Prepaid Expenses Property, plant and equipment (net) 3,000 34,000 2,000 5,000 30,000 4,000 45,000 38,000 $125,000 $110,000 $15,000 Accounts Payable Interest Payable Accrued expenses $19,000 800 600 3,200 2,400 2,000 Unearned revenu 3,000 Notes Payable (long-term) Common Stock ($5) Retained Earnings 45,000 20,000 $25,000 40,000 30,000 $29,000 $125,000 $110,000 ACT 5001- Worksheet 5 Module 4 Holbrook Company had the following financial information for years 2017 and 2018. Refer to this information to answer the required and the bonus problem below. Income Statement 2018 2017 $180,000 110,000 $165,000 100,000 Sales Revenue Cost of Goods Sold Gross Profit 70,000 53,300 2,700 14,000 4,000 $10,000 65,000 50,400 Operating expenses Interest expense 2,600 12,000 3,000 $9,000 Income before income tax Income tax expense Net Income Balance Sheet 2018 2017 $22,000 19,000 $16,000 17,000 Cash Accounts Receivable (net) Investments (short-term) Inventory Prepaid Expenses Property, plant and equipment (net) 3,000 34,000 2,000 5,000 30,000 4,000 45,000 38,000 $125,000 $110,000 $15,000 Accounts Payable Interest Payable Accrued expenses $19,000 800 600 3,200 2,400 2,000 Unearned revenu 3,000 Notes Payable (long-term) Common Stock ($5) Retained Earnings 45,000 20,000 $25,000 40,000 30,000 $29,000 $125,000 $110,000