P/E 17.86 9.14 EV/EBITDA "Calculation is based on a 365-day year 4-24 DUPONT ANALYSIS A firm has been experiencing low profitability in recent years. Perform an analysis of the firm's financial position using the DuPont equation. The firm has no lease payments but has a $2 million sinking fund payment on its debt. The most recent industry average ratios and the firm's financial statements are as follows Industry Average Ratios 3x Current ratio 6X Foxed assets turnover 20% Debt-to-capital ratio Total assets turnover 3X 3% Profit margin Times interesteamed 9X EBITDA coverage 99 Return on total assets Inventory turnover 10X Return on common equity 1286 Days sales outstanding 24 days Return on invested capital 11.50 Calculation is based on a day you 7X 2011 Layo ** Page 141 of 72. Location 5029 of 24482 3 w tv A MacBook Pro % 5 & 7 7 6 ( 9 ) O 8 R T Y 1 0 ale for Mac 2 - Fundamentals of Financial Ma 142% Page 142 of 762 damental Concepts in Financial Management 5.45 11 5303 Balance Sheet as of December 31, 2018 (Millions of Dollars) Cash and equivalents $ 78 Accounts payable Accounts receivable 66 Other current liabilities Inventories 159 Notes payable Total current assets Total current liabilities Long-term debt Total abilities Grossfied assets 225 Common stock Less depreciati 78 Retained earnings Net fixed assets 5147 Total stockholders' equity Total assets $450 Total abilities and equity 29 5 85 50 $135 114 201 $315 $450 Income Statement for Year Ended December 31, 2018 (Millions of Dollars) $7950 Net sales Cost of goods sold 6600 Gross profit $135.0 Selling expenses 735 EBITDA 5 615 Depreciation expense 12.0 Earnings before interest and taxes (EBIT) $ 49.5 Interest expense 4.5 Earnings before taxes (EBT) $ 45,0 Taxes (40%) 18.0 Net income $ 270 a. Calculate the ratios you think would be useful in this analysis. b. Construct a DuPont equation, and compare the company's ratios to the industry ave. rage ratios. c. Do the balance sheet accounts or the income statement figures seem to be primarily responsible for the low profits? d. Which specific accounts seem to be most out of line relative to other firms in the industry? e. If the firm had a pronounced seasonal sales pattern or if it grew rapidly during the year, how might that affect the validity of your ratio analysis? How might you correct for such potential problems? hensive/Spreadsheet Problem 21% Page 142 of 762. Location S047 of 24482 tv A os 3 w P/E 17.86 9.14 EV/EBITDA "Calculation is based on a 365-day year 4-24 DUPONT ANALYSIS A firm has been experiencing low profitability in recent years. Perform an analysis of the firm's financial position using the DuPont equation. The firm has no lease payments but has a $2 million sinking fund payment on its debt. The most recent industry average ratios and the firm's financial statements are as follows Industry Average Ratios 3x Current ratio 6X Foxed assets turnover 20% Debt-to-capital ratio Total assets turnover 3X 3% Profit margin Times interesteamed 9X EBITDA coverage 99 Return on total assets Inventory turnover 10X Return on common equity 1286 Days sales outstanding 24 days Return on invested capital 11.50 Calculation is based on a day you 7X 2011 Layo ** Page 141 of 72. Location 5029 of 24482 3 w tv A MacBook Pro % 5 & 7 7 6 ( 9 ) O 8 R T Y 1 0 ale for Mac 2 - Fundamentals of Financial Ma 142% Page 142 of 762 damental Concepts in Financial Management 5.45 11 5303 Balance Sheet as of December 31, 2018 (Millions of Dollars) Cash and equivalents $ 78 Accounts payable Accounts receivable 66 Other current liabilities Inventories 159 Notes payable Total current assets Total current liabilities Long-term debt Total abilities Grossfied assets 225 Common stock Less depreciati 78 Retained earnings Net fixed assets 5147 Total stockholders' equity Total assets $450 Total abilities and equity 29 5 85 50 $135 114 201 $315 $450 Income Statement for Year Ended December 31, 2018 (Millions of Dollars) $7950 Net sales Cost of goods sold 6600 Gross profit $135.0 Selling expenses 735 EBITDA 5 615 Depreciation expense 12.0 Earnings before interest and taxes (EBIT) $ 49.5 Interest expense 4.5 Earnings before taxes (EBT) $ 45,0 Taxes (40%) 18.0 Net income $ 270 a. Calculate the ratios you think would be useful in this analysis. b. Construct a DuPont equation, and compare the company's ratios to the industry ave. rage ratios. c. Do the balance sheet accounts or the income statement figures seem to be primarily responsible for the low profits? d. Which specific accounts seem to be most out of line relative to other firms in the industry? e. If the firm had a pronounced seasonal sales pattern or if it grew rapidly during the year, how might that affect the validity of your ratio analysis? How might you correct for such potential problems? hensive/Spreadsheet Problem 21% Page 142 of 762. Location S047 of 24482 tv A os 3 w