for the drop down going in order from left to right starting at the top the options for option 1 are: operating profit margin or net profit margin 2) debt ratio or equal multipler 3) shareholder and divended management or use of debt versus equity financing 4) control over its expenses or management of its revenues and depreciation methods

9. An analysis of company performance using DuPont analysis A sheaf of papers in her hand, your friend and colleague, Madison, steps into your office and asked the following. MADISON: Do you have 10 or 15 minutes that you can spare? YOU: Sure, I've got a meeting in an hour, but I don't want to start something new and then be interrupted by the meeting, so how can I help? MADISON: I've been reviewing the company's financial statements and looking for ways to improve our performance, in general, and the company's return on equity, or ROE, in particular. Xavier, my new team leader, suggested that I start by using a DuPont analysis, and I'd like to run my numbers and conclusions by you to see whether I've missed anything. Here are the balance sheet and income statement data that Xavier gave me, and here are my notes with my calculations. Could you start by making sure that my numbers are correct? YOU: Give me a minute to look at these financial statements and to remember what I know about the DuPont analysis. Balance Sheet Data Income Statement Data Cash $1,300,000 Accounts payable $1,560,000 Sales Accounts receivable 2,600,000 Accruals 520,000 Cost of goods sold Gross profit $26,000,000 13,000,000 13,000,000 Inventory 3,900,000 Notes payable 2,080,000 4,160,000 Current assets 7,800,000 Current liabilities 6,500,000 Operating expenses EBIT Long-term debt 6,500,000 Total liabilities 3,640,000 7,800,000 1,300,000 Interest expense 686,400 5,813,600 Common stock EBT Net fixed assets 5,200,000 Retained earnings 3,900,000 Taxes 1,453,400 Total equity Net income $4,360,200 5,200,000 $13,000,000 Total assets $13,000,000 Total debt and equity If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the operating profit margin, the total asset turnover ratio, and the debt ratio And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratios provide insights into the company's shareholder and dividend management, effectiveness in using the company's assets, and management of its revenues and depreciation methods Do not round intermediate calculations and round your final answers up to two decimals. Canis Major Veterinary Supplies Inc. DuPont Analysis Ratios Calculation Value Profitability ratios Numerator Denominator 13,000,000 / 26,000,000 = 50.00 26,000,000 25.00 6,500,000 3,778,840 / 26,000,000 14.53 Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Return on equity (%) Asset management ratio Total assets turnover 3,778,840 / 5,200,000 72.67 26,000,000 13,000,000 2.00 Financial ratios Equity multiplier 13,000,000 1 5,200,000 2.50 MADISON: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Xavier would have been very disappointed in me if I had showed him my original work. So, now let's switch topics and identify general strategies that could be used to positively affect Canis Major's ROE. YOU: OK, so given your knowledge of the component ratios used in the DuPont equation, which of the following strategies should improve the company's ROE? Check all that apply. Use more debt financing in its capital structure and increase the equity multiplier. Use more equity financing in its capital structure, which will increase the equity multiplier. Increase the efficiency of its assets so that it generates more sales with each dollar of asset investment and increases the company's total assets turnover. Increase the cost and amount of assets necessary to generate each dollar of sales because it will increase the company's total assets turnover