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 Cash $1,300,000 Accounts payable $1,560,000 Accounts receivable 2,600,000 Accruals 520,000 Inventory 3,900,000 Notes payable 2,080,000 Current assets 7,800,000 Current liabilities 4,160,000 Long-term debt 3,640,000 Total liabilities 7,800,000 Common stock 1,300,000 Net fixed assets 5,200,000 Retained earnings 3,900,000 Total equity 5,200,000 Total assets $13,000,000 Total debt and equity $13,000,000 Income Statement Data Sales $26,000,000 Cost of goods sold 13,000,000 Gross profit 13,000,000 Operating expenses 6,500,000 EBIT 6,500,000 Interest expense 686,400 EBT 5,813,600 Taxes 2,034,760 Net income $3,778,840 , the total asset If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the turnover ratio, and the And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratios provide insights into the company's effectiveness in using the company's assets, and Now, let's see your notes with your ratios, and then we can talk about possible strategies that will improve the ratios. I'm going to check the box to the side of your calculated value if your calculation is correct and leave it unchecked if your calculation is incorrect. Canis Major Veterinary Supplies Inc. DuPont Analysis Value Correct/Incorrect 2.00 Ratios Value Correct/Incorrect Ratios Profitability ratios Asset management ratio Gross profit margin (%) % 50.00 Total assets turnover Operating profit margin(%) 22.36 Net profit margin (%) 29.07 Financial ratios Return on equity (%) ) 97.09 Equity multiplier 1.67