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. Hydra Cosmetics Inc. DuPont Analysis Check if Correct Ratios Asset management ratio Total asset turnover Check if Correct Value Value 2.00 Ratios Profitability ratios Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Return on equity (%) 50.00 22.36 DOOD 29.07 Financing ratios Equity multiplier 1.67 97.09 Chloe 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: Hydra Cosmetics Inc. DuPont Analysis Calculation Numerator Denominator Value tory Ratios Profitability ratios Gross profit margin (%) Operating profit margin (%) Hydra Cosmetics Inc. DuPont Analysis Calculation Numerator Denominator Value 1 Ratios Profitability ratios Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Retum on equity (%) Asset management ratio Total asset turnover Financing ratios Equity multiplier Chloe I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Eric would have been very disappointed in me if I had showed him 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 asset turnover. Use more equity financing in its capital structure, which will increase the equity multiplier. Increase the firm's bottom-line profitability for the same volume of sales, which will increase the company's net signment - Analysis of Financial Statements ou Give me a minute to look at these financial statements and to remember what I know about the DuPont analysis. Cash Accounts receivable Inventory Current assets Balance Sheet Data $1,200,000 Accounts payable 2,400,000 Accruals 3,600,000 Notes payable 7,200,000 Current liabilities Long-term debt Total liabilities Common stock 4,800,000 Retained earnings Total equity $12,000,000 Total debt and equity Income Statement Data $1,440,000 Sales $24,000,000 480,000 Cost of goods sold 12,000,000 1,920,000 Gross profit 12,000,000 3,840,000 Operating expenses 6,000,000 3,360,000 EBIT 6,000,000 7,200,000 Interest expense 633,600 1,200,000 EBT 5,366,400 3,600,000 Taxes 1,878,240 4,800,000 Net income $3,488,160 $12,000,000 Net fixed assets Total assets If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the net profit margin the total asset turnover ratio, and the equity multiplier And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratios provide insights into the company's use of debt versus equity financing effectiveness in using the company's assets, and control over its expenses 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 Hydra Cosmetics Inc