LANDON: OK, it looks like I've got a couple of incorrect values, so show me your calculations, and then we can talk strategies for improvement. YOU: I've just made rough calculations, so let me complete this table by inputting the components of each ratio and its value: Do not round intermediate calculations and round your final answers up to two decimals Hydra Cosmetics Inc. DuPont Analysis Ratios Profitability ratios Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Return on equity (%) Asset management ratio Total assets turnover Financial ratios Equity multiplier Calculation Numerator 7 Denominator Value LANDON: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Amelia would have been very disappointed in me if I had showed her my original work. So, now let's switch topics and identify general strategies that could be used to positively affect Hydra'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. Increase the cost and amount of assets necessary to generate each dollar of sales because it will increase the company's total assets tumover. Decrease the amount of debt financing used by the company, which will decrease the total assets turnover ratio. Increase the firm's bottom-line profitability for the same volume of sales, which will increase the company's net profit margin. Use more debt financing in its capital structure and increase the equity multiplier. LANDON: I think I understand now. Thanks for taking the time to go over this with me, and let me know when I can return the favor. LANDON: OK, it looks like I've got a couple of incorrect values, so show me your calculations, and then we can talk strategies for improvement. YOU: I've just made rough calculations, so let me complete this table by inputting the components of each ratio and its value: Do not round intermediate calculations and round your final answers up to two decimals Hydra Cosmetics Inc. DuPont Analysis Ratios Profitability ratios Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Return on equity (%) Asset management ratio Total assets turnover Financial ratios Equity multiplier Calculation Numerator 7 Denominator Value LANDON: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Amelia would have been very disappointed in me if I had showed her my original work. So, now let's switch topics and identify general strategies that could be used to positively affect Hydra'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. Increase the cost and amount of assets necessary to generate each dollar of sales because it will increase the company's total assets tumover. Decrease the amount of debt financing used by the company, which will decrease the total assets turnover ratio. Increase the firm's bottom-line profitability for the same volume of sales, which will increase the company's net profit margin. Use more debt financing in its capital structure and increase the equity multiplier. LANDON: I think I understand now. Thanks for taking the time to go over this with me, and let me know when I can return the favor
