Now, lets see your notes with your ratios, and then we can talk about possible strategies that will improve the ratios. Im 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.

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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 1 help? MADISON: IVe 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 1 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. I I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the , the total asset urnover 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 Vow. Iet's cen vour notes with vour ratios, and then we can talk ahout nossible strateoies that will imnrove the ratios. 1 'm onino to cherk the hax th And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratios provide insights into the company's affectiveness 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 MADISON: OK, it looks like IVe got a couple of incorrect values, so show me your calculations, and then we can taik strategies for improvement. YOU: TVe fust 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. Canis Major Veterinary Supplies Inc. DuPont Analysis MADISON: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassmentl Xavier would have been very disappointed in me if 1 had showed him my original work. So, now let's switch topies 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. Increase the interest rate on its notes payable or long-term debt obligations because it will reduce the company's net profit margin. Increase the cost and amount of assets necessary to generate each dollar of sales because it will increase the company's total assets turnover. Increase the firm's bottorn-line profitability for the same volume of sales, which will increase the company's net profit margin. competitors was $1,785,000. As an analyst, you want to make comments on the expected performance of these two companles in the coming year. You've collected data from the companies' financial statements. This information is listed as follows: (Note: Assume there are 365 days in a year.) Using this information, complete the following statements to include in your analysis. 1. A days of sales outstanding represents an efficlent credit and collection policy. Between the two companies, is collecting cash from its customers faster than 2. Our Play's fixed assets turnover ratio - but both companies are collecting their receivables less quickly than the industry average. acquisitian cost of its fixed assets is than that of Like Games. This could be because Our Play is a relatively new company, so the than the recorded cost of Like Games's net foxed assets. 3. Uke Games's total assets turnover ratio is , which is total assets tumover ratio indicates greater efficiency. than the industry's average total assets tumover ratio. In general, a higher 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 1 help? MADISON: IVe 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 1 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. I I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the , the total asset urnover 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 Vow. Iet's cen vour notes with vour ratios, and then we can talk ahout nossible strateoies that will imnrove the ratios. 1 'm onino to cherk the hax th And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratios provide insights into the company's affectiveness 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 MADISON: OK, it looks like IVe got a couple of incorrect values, so show me your calculations, and then we can taik strategies for improvement. YOU: TVe fust 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. Canis Major Veterinary Supplies Inc. DuPont Analysis MADISON: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassmentl Xavier would have been very disappointed in me if 1 had showed him my original work. So, now let's switch topies 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. Increase the interest rate on its notes payable or long-term debt obligations because it will reduce the company's net profit margin. Increase the cost and amount of assets necessary to generate each dollar of sales because it will increase the company's total assets turnover. Increase the firm's bottorn-line profitability for the same volume of sales, which will increase the company's net profit margin. competitors was $1,785,000. As an analyst, you want to make comments on the expected performance of these two companles in the coming year. You've collected data from the companies' financial statements. This information is listed as follows: (Note: Assume there are 365 days in a year.) Using this information, complete the following statements to include in your analysis. 1. A days of sales outstanding represents an efficlent credit and collection policy. Between the two companies, is collecting cash from its customers faster than 2. Our Play's fixed assets turnover ratio - but both companies are collecting their receivables less quickly than the industry average. acquisitian cost of its fixed assets is than that of Like Games. This could be because Our Play is a relatively new company, so the than the recorded cost of Like Games's net foxed assets. 3. Uke Games's total assets turnover ratio is , which is total assets tumover ratio indicates greater efficiency. than the industry's average total assets tumover ratio. In general, a higher