Problem 1: Suppose you have the following Balance Sheet Data
Assets			2016	2017		Liabilities				2016	2017
Current Assets						Current Liabilities
Cash			14	10		Accounts Payable				50	45
Accounts receivable			60	22		ST Debt and Notes Payable				40	37
inventories			50	70
Total Current Assets			124	102		Total Current Liabilities				90	82
Long Term Assets						Long Term Liabilities
Net PPE			250	290		Long Term Debt				130	160
Total Long Term assets			250	290		Total Long Term Liabilities				130	160
						Total Liabilities				220	242
						Stockholders Equity
						Common Stock				10	10
						Paid In Surplus (Capital)				110	110
						Retained Earnings				34	30
						Total Shareholders Equity				154	150
Total Assets			374	392		Total Liabilities and Shareholders Equity				374	392

What can we say is going on with this company by looking at the balance sheet? (Make sure to look at the dates to know which column is the most recent period!)
Analyze the changes in each of the balance sheet tems and comment on what is occuring.
Solution:
Cash
Accounts Receivable
Inventories
PPE
Accounts Payable
ST Debt & Notes Payable
LT Debt
Common Stock and Paid in Capital
Retained Earnings

calculate liquidity ratios for 2017:
		2016	2017		Comment on Ratios
Current Ratio		1.38
Quick Ratio		0.82
Cash Ratio		0.16
calculate some leverage ratios for 2017:					Comment on Ratios
		2016	2017
Book Debt to Equity		1.10
Book Debt to Capital		0.52
Equity Multiplier		2.43

Problem 2 - Use of Ratios to Make Other Calculations
You have a company that currently has a market capitalization of $4.6 billion
It has a market to book ratio of 3 and a book debt to equity ratio of 6.
If cash is $1.1 billion, what is the company's enterprise value?
Solution:
Discussion of the Dupont Formula
The Dupont Formula is a way of disaggregating the components of ROE
ROE = Net Margin X Asset Turnover X Equity Multiplier
We know by definition, ROE = Net Income / Book Equity
Dupont shows us:
ROE =	Net Income /		Times		Sales/			Times			Assets/
	Sales				Assets						Equity

We also know by definition, ROA = Net Income / Assets

Dupont shows us:

ROA =

Net Income/

Times

Sales/

Sales

Assets

Problem 3: Consider the following information -

Suppose we use the data from Kroger and Whole Foods:

KR - TTM

WFM - TTM

Net Profit Margin

1.34%

2.44%

Total Asset Turnover

3.36

2.46

Equity Multiplier

5.83

1.91

Calculate Kroger and Whole Foods ROE and ROA from the data given. We know that ROE = net income / book equity and ROA = net income / total assets; while none of those components are given, we have ratios that can solve the problem!

Question? What would WFM's total asset turnover need to be for it to have the same ROE as Kroger?