fund poyment on its sebt. The most recent ndusry avenge rabos and the firm's francial statements are as folaws: Income Statement for Year. Endod Narawhar 5 i nnav f-tar c. Do the balance theet accounts of the income statement figures seem to be prmachy responselt for the low prefite? L. Analysis of the extended Du Poot equabioe and the set of yatios shows that the turnover ratio of sales to asseis is qute bow, howevec, its profit macon comparez favpraby mith 17. Analyss of the extended Du Pont equavon and the set of ratios shens that most of the Asset Management ratios are below the averagen. fither asiets shaulf be figher grm . The present level of sales, of the firm is carring bss assets than it needs to support its saks ssiets. nvestinent in awets. a. Which specif accouns seein to Bh most out of the whteve to obver firens an the ndustry? Iquiry. E. If the firm had a pronounced seasonal ales pattem or if it grew rapdly durng the yeac, how might that alfect the yaldity of your rabio analyse? 1. Rapid growth waild most lkely affect the coverige rabos, with lttle effect on asset management iatios. Seasonal sales pattems woeld not substantialy affect your analyse III. If the firm had sharp reasonal saks patteins, or fit grew capily dueng the yes, many ratios would most kooy be distortedt. N. It is mere importont to adjust the debt matio than the inventory tumover rato to. occount for any seasonal fictuations. V. Seasonal sake pattems woid most kely alfect the proftablty rabos, with hthe effect on asset manggement rabas. flapel growth woult for substantaly affect your analyed. How might you comect for such potental proterns? II. It is pessale to cerrect for wod proticms by using avenge rather than end of penod Inancial statement information. 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 $1 million sinking fund payment on its debt. The most recent industry average ratios and the firm's financial statements are as follows: Balance Sheet as of December 31, 2021 (millions of dollars) a. Calculate the following ratios. Do not round intermediate calculations. Round your answers to two decimal places. b. Construct a DuPont equation, and the industry. Do not round intermediate Oalculations. Round your answers to two decimal places. C. Do the balance sheet accounts or the income statement figures seem to be primarily responsible for the low profits? I. Analysis of the extended Du Pont equation and the set of ratios shows that the turnover ratio of sales to assets is quite low, however, its profit margin compares favorably with the industry average. Either sales should be lower given the present level of assets, or the firm is carrying less assets than it needs to support its sales. II. Analysis of the extended Du Pont equation and the set of ratios shows that most of the Asset Management ratios are below the averages. Either assets should be higher given the present level of sales, or the firm is carrying less assets than it needs to support its sales. III. The low ROE for the firm is due to the fact that the firm is utilizing more debt than the average firm in the industry and the low ROA is mainly a result of an excess investment in assets. IV. The low ROE for the firm is due to the fact that the firm is utilizing less debt than the average firm in the industry and the low ROA is mainly a result of an lower than average investment in assets V. Analysis of the extended Du Pont equation and the set of ratios shows that the turnover ratio of sales to assets is quite low, however, its profit margin compares favorably with the industry average. Fither sales should be higher given the present level of assets, or the firn is carrying more assets than it needs to support its sales. d. Which specific accounts seem to be most out of line relative to other firms in the industry? I. The accounts which seem to be most out of line include the following ratios: Inventory Turnover, Days Sales Outstanding, Total Asset Turnover, Return on Assets, and Return on Equity. II. The accounts which seem to be most out of line include the following ratios: Current, EBITDA Coverage, Inventory Tumover, Days Sales Outstanding, and Return on Equity. III. The accounts which seem to be most out of line include the following ratios: Debt to Total Capital, Inventory Turnover, Total Asset Turnover, Return on Assets, and Profit Margin. IV. The accounts which seem to be most out of line include the following ratios: Times Interest Earned, Total Asset Tumover, Profit Margin, Retum on Assets, and Return on Equity. V. The accounts which seem to be most out of line include the following ratios: Inventory Tumover, Days Sales Outstanding, Fixed Asset Turnover, Profit Margin, and Return on Equity. e. If the firm had a pronounced seasonal sales pattern or if it grew rapidly during the year, how might that affect the validity of your ratio analysis? I. Rapid growth would most likely affect the coverage ratios, with little effect on asset management ratios. Seasonal sales patterns would not substantially affect your analysis. II. Seasonal sales pattems would most likely affect the liquidity ratios, with little effect on asset management ratios. Rapid growth would not substantially affect your analysis. III. If the firm had sharp seasonal sales patterns, or if it grew rapidly during the year, many ratios would most likely be distorted. IV. It is more important to adjust the debt ratio than the inventory turnover ratio to account for any seasonal fluctuations. V. Seasonal sales patterns would most likely affect the profitability ratios, with little effect on asset management ratios. Rapid growth would not substantially affect your analysis. f. How might you correct for such potential problems? I. It is possible to correct for such problems by insuring that all firms in the same industry group are using the same accounting techniques. II. It is possible to correct for such problems by using average rather than end-of-period financial statement information. III. It is possible to correct for such problems by comparing the calculated ratios to the ratios of firms in a different line of business: IV. It is possible to correct for such problems by comparing the calculated ratios to the ratios of firms in the same incustry group over an extended period. V. There is no need to correct for these potential problems since you are comparing the calculated ratios to the ratios of firms in the same industry group