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Question 1 You have the data below for two companies, A and B. a. FOR 2021 ONLY, calculate the ROE for Companies A and B.
Question 1
You have the data below for two companies, A and B.
a. FOR 2021 ONLY, calculate the ROE for Companies A and B. Which has a higher ROE?
b. What does the Dupont Analysis tell us about the relative profitability of Company A versus Company B? Why is it higher or lower?
| Company A | Company B | ||||||
| 2019 | 2020 | 2021 | 2019 | 2020 | 2021 | ||
| Total Liabilities/Total Assets | 37.00% | 82.80% | 78.10% | 41.0% | 57.0% | 51.1% | |
| EBIT Margin % | 17.4% | 11.6% | 16.2% | 11.0% | 10.2% | 18.4% | |
| Total Asset Turnover | 1.5x | 1.8x | 2.5x | 1.8x | 1.6x | 1.2x | |
| Interest Burden | 0.8 | 0.9 | 0.9 | 0.91 | 0.9 | 0.94 | |
| Tax Burden | 0.76 | 0.88 | 0.92 | 0.76 | 0.94 | 0.92 | |
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