DuPONT ANALYSIS

A firm has been experiencing low profitability in recent years. Perform an analysis of the firm's financial position using the DuPont equation. The firm has no lease payments but has a $3 million sinking fund payment on its debt. The most recent industry average ratios and the firm's financial statements are as follows:

Industry Average Ratios
Current ratio	3.68x		Fixed assets turnover	6.64x
Debt-to-capital ratio	17.04%		Total assets turnover	2.90x
Times interest earned	19.05x		Profit margin	10.60%
EBITDA coverage	18.30x		Return on total assets	30.63%
Inventory turnover	8.36x		Return on common equity	48.77%
Days sales outstandinga	25 days		Return on invested capital	41.36%

^aCalculation is based on a 365-day year.

Balance Sheet as of December 31, 2016 (Millions of Dollars)
Cash and equivalents	$79		Accounts payable	$53
Accounts receivables	61		Other current liabilities	26
Inventories	166		Notes payable	35
Total current assets	$306		Total current liabilities	$114
			Long-term debt	26
			Total liabilities	$140
Gross fixed assets	237		Common stock	110
Less depreciation	105		Retained earnings	188
Net fixed assets	$132		Total stockholders' equity	$298
Total assets	$438		Total liabilities and equity	$438

Income Statement for Year Ended December 31, 2016 (Millions of Dollars)
Net sales	$730.0
Cost of goods sold	496.4
Gross profit	$233.6
Selling expenses	73.0
EBITDA	$160.6
Depreciation expense	12.4
Earnings before interest and taxes (EBIT)	$148.2
Interest expense	4.9
Earnings before taxes (EBT)	$143.3
Taxes (40%)	57.3
Net income	$86.0

1. Calculate the following ratios. Do not round intermediate steps. Round your answers to two decimal places.

   	Firm	Industry Average
   Current ratio	x	3.68x
   Debt to total capital	%	17.04%
   Times interest earned	x	19.05x
   EBITDA coverage	x	18.30x
   Inventory turnover	x	8.36x
   Days sales outstanding	days	25days
   Fixed assets turnover	x	6.64x
   Total assets turnover	x	2.90x
   Profit margin	%	10.60%
   Return on total assets	%	30.63%
   Return on common equity	%	48.77%
   Return on invested capital	%	41.36%

2. Construct a DuPont equation for the firm and the industry. Do not round intermediate steps. Round your answers to two decimal places.

   	Firm	Industry
   Profit margin	%	10.60%
   Total assets turnover	x	2.90x
   Equity multiplier	x	x