Problem 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
Current ratio	2.69x		Fixed assets turnover	7.08x
Debt-to-capital ratio	21.33%		Total assets turnover	3.44x
Times interest earned	14.90x		Profit margin	8.74%
EBITDA coverage	14.57x		Return on total assets	34.34%
Inventory turnover	12.38x		Return on common equity	49.86%
Days sales outstandinga	25.75 days		Return on invested capital	41.75%

aCalculation is based on a 365-day year.

Balance Sheet as of December 31, 2016 (Millions of Dollars)
Cash and equivalents	$35		Accounts payable	$28
Accounts receivables	39		Other current liabilities	14
Inventories	78		Notes payable	28
Total current assets	$152		Total current liabilities	$70
			Long-term debt	12
			Total liabilities	$82
Gross fixed assets	115		Common stock	55
Less depreciation	37		Retained earnings	93
Net fixed assets	$78		Total stockholders' equity	$148
Total assets	$230		Total liabilities and equity	$230

Income Statement for Year Ended December 31, 2016 (Millions of Dollars)
Net sales	$460.0
Cost of goods sold	335.8
Gross profit	$124.2
Selling expenses	32.2
EBITDA	$92.0
Depreciation expense	9.2
Earnings before interest and taxes (EBIT)	$82.8
Interest expense	4.0
Earnings before taxes (EBT)	$78.8
Taxes (40%)	31.5
Net income	$47.3

Calculate the following ratios. Do not round intermediate steps. Round your answers to two decimal places.

	Firm	Industry Average
Current ratio	x	2.69x
Debt to total capital	%	21.33%
Times interest earned	x	14.90x
EBITDA coverage	x	14.57x
Inventory turnover	x	12.38x
Days sales outstanding	days	25.75days
Fixed assets turnover	x	7.08x
Total assets turnover	x	3.44x
Profit margin	%	8.74%
Return on total assets	%	34.34%
Return on common equity	%	49.86%
Return on invested capital	%	41.75%

Construct a DuPont equation for the firm and the industry. Do not round intermediate steps. Round your answers to two decimal places.

	Firm	Industry
Profit margin	%	8.74%
Total assets turnover	x	3.44x
Equity multiplier	x	x