DuPont Analysis

A firm has been experiencing low profitability in recent years. Perform an analysis of the firm's financial position using the extended Du Pont equation. The firm has no lease payments, but has a $2 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	4.28x		Fixed assets turnover	7.10x
Debt/total assets	25.10%		Total assets turnover	2.75x
Times interest earned	23.72x		Profit margin on sales	6.77%
EBITDA coverage	20.88x		Return on total assets	18.63%
Inventory turnover	10.85x		Return on common equity	24.87%
Days sales outstandinga	41days

aCalculation is based on a 365-day year.

Balance Sheet as of December 31, 2012 (Millions of Dollars)
Cash and equivalents	$41		Accounts payable	$23
Net receivables	41		Notes payable	20
Inventories	94		Other current liabilities	8
Total current assets	$176		Total current liabilities	$51
			Long-term debt	13
			Total liabilities	$64
Gross fixed assets	138		Common stock	66
Less depreciation	59		Retained earnings	125
Net fixed assets	$79		Total stockholders' equity	$191
Total assets	$255		Total liabilities and equity	$255

Income Statement for Year Ended December 31, 2012 (Millions of Dollars)
Net sales	$510.0
Cost of goods sold	377.4
Gross profit	$132.6
Selling expenses	40.8
EBITDA	$91.8
Depreciation expense	15.3
Earnings before interest and taxes (EBIT)	$76.5
Interest expense	2.0
Earnings before taxes (EBT)	$74.5
Taxes (40%)	29.8
Net income	$44.7

Calculate those ratios that you think would be useful in this analysis. Do not round intermediate steps. Round your answers to two decimal places.

	Firm	Industry Average
Current ratio	x	4.28x
Debt to total assets	%	25.10%
Times interest earned	x	23.72x
EBITDA coverage	x	20.88x
Inventory turnover	x	10.85x
DSO	days	41days
F.A. turnover	x	7.10x
T.A. turnover	x	2.75x
Profit margin	%	6.77%
Return on total assets	%	18.63%
Return on common equity	%	24.87%

Construct an extended Du Pont equation, and compare the company's ratios to the industry average ratios. Do not round intermediate steps. Round your answers to two decimal places.

	Firm	Industry
Profit margin	%	6.77%
Total assets turnover	x	2.75x
Equity multiplier