profitability in recent y Dulant equation. The went on its debt. The t ion Afirma finan DUPONT ANALYSIS Debela is benep ps but has man y averat anthem financial statements are as follow Industry Average Ratios 33 RO $ 45 Fue assets tumover Total assets tumover Profit margin Metum on total assets EBITDA coverage Return on common equity Inventory tumover Return on invested capital Days les outstanding Gation is based on a 365 day year Balance Sheet as of December 31, 2015 (Millions of Dollars) Cash and equivalents $78 Accounts payable Accounts receivable Other current liabilities Inventories 159 Notes payable 29 Totalcument assets $303 Total current liabilities $ 85 Long term debt Total abilities Gross feed assets 225 Common stock Less depreciation Retained earnings 201 $147 Total stockholders' equity $315 Total liabilities and equity $450 50 $135 114 Net fixed assets Total assets $450 Income Statement for Year Ended December 31, 2015 (Millions of Dollars) $135.0 733 $795.0 Net sales 660.0 Cost of goods sold Gross profit Selling expenses $ 61.5 EBITDA Depreciation expense 12.0 Earnings before interest and taxes (EBIT) $ 49.5 Interest expense 45 Earnings before taxes (EBT) $ 45.0 Taxes (40%) 18.0 Net income $ 27.0 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 average ratios. Do the balance sheet accounts or the income statement figures seem to be primary responsible for the low profits? d. Which specific accounts seem to be most out of line relative to other firms in the industry? If the firm had a pronounced seasonal sales pattern or if it grew rapidly during to vear, how might that affect the validity of your ratio analysis? How might you com for such potential problems? ola the most recent 4-24 DUPONT ANALYSIS A firm has Debt Total capital OPONT ANALYSIS A firm has been experiencing low profitability in the om an analysis of the firm's financial position using the Dront equation. The se payments but has a s2 million sinking fund payment on its debt. The wustry average ratins and the firm's financial statements are as follow Industry Average Ratios 115 Fixed assets turnover Current ratio Total assets turnover 20% Debt-to-capital ratio Profit margin Times interest earned Return on total assets EBITDA coverage Return on common equity Inventory turnover 10x Return on invested capital Days sales outstanding 24 days "Calculation is based on a 365-day year. Balance Sheet as of December 31, 2015 (Millions of Dollars) Cash and equivalents $78 Accounts payable $ 45 Accounts receivable 66 Other current liabilities Inventories 159 Notes payable Total current assets $303 Total current liabilities $ 85 Long-term debt SO Total liabilities $135 Gross fixed assets 225 Common stock 114 Less depreciation Retained earnings Net fixed assets $147 Total stockholders' equity $315 Total assets $450 Total liabilities and equity $450 201 Income Statement for Year Ended December 31, 2015 (Millions of Dollars) $795.0 660,0 $135.0 735 615 Net sales Cost of goods sold Gross profit Selling expenses EBITDA Depreciation expense Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Taxes (40%) Net Income 45.0 180 $ 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 average ratios. c. Do the balance sheet accounts or the income statement figures seem to be primary 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 year, how might that affect the validity of your ratio analysis? How might you for such potential problems? pidly during the you correct