Question
I calculated the dupont model for Ford 2001 & GM 2001. I calculated the profit margin, asset turnover, financial leverage and ROE to be as
I calculated the dupont model for Ford 2001 & GM 2001. I calculated the profit margin, asset turnover, financial leverage and ROE to be as follows. Can someone verify the following to see if I did it correctly:
Profit Margin (PM) = Net income / Sales
PM Ford 2001 = 65,453 / 162,412 = -0.336
PM GM 2001 = 601 / 177,260 = .0033
Asset Turnover (AT) = Sales / Average total assets
AT Ford 2001 = 162,412 / ((276,543 + 284,421) / 2) = 0.579
AT GM 2001 = 177,260 / ((323969 + 303100) / 2) = 0.565
Return on Assets (ROA) = Net Income / Average Total Assets
ROA Ford 2001 = -5,453 / ((276,543 + 284,421) / 2) = -0.194
ROA GM 2001 = 601 / ((323,969 + 303,100) / 2) = .0019
Financial Leverage (FL) = Average Total Assets / Average stockholder's Equity
FL Ford 2001 = ((276,543 + 284,421)/2) / ((7,786 + 18,610)/2) = 21.251
FL GM 2001 = ((323,969 + 303,100)/2) / ((1,970 + 30,175)/2) = 12.571
Return on Equity (ROE) = PM *AT*FL
ROE Ford 2001 = -3.35751% * .579046 * 21.25185 = -41.316%
ROE GM 2001 = 0.33904% * .56536 * 12.57104 = 2.409%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started