The DuPont equation shows the relationships among asset management, debt management, and

market

ratios. Management can use the DuPont equation to analyze ways of improving the firm's performance. Its equation is:

Ratio analysis is important to understand and interpret financial statements; however, sound financial analysis involves more than just calculating and interpreting numbers.

Qualitative

factors also need to be considered.

Quantitative Problem: Rosnan Industries' $2018$ and $2017$ balance sheets and income statements are shown below.

Balance Sheets:

$20182017$

Cash and equivalents $$80$ $$65$

Accounts receivable $275300$

Inventories $375350$

Total current assets $$730$ $$715$

Net plant and equipment $2,0001,490$

Total assets $$2,730$ $$2,205$

Accounts payable $$150$ $$85$

Accruals $7550$

Notes payable $130155$

Total current liabilities $$355$ $$290$

Long$-$term debt $450290$

Common stock $1,2251,225$

Retained earnings $700400$

Total liabilities and equity $$2,730$ $$2,205$

Income Statements:

$20182017$

Sales $$2,000$ $$1,500$

Operating costs excluding depreciation $1,2501,000$

EBITDA $$750$ $$500$

Depreciation and amortization $10075$

EBIT $$650$ $$425$

Interest $6245$

EBT $$588$ $$380$

Taxes $(40\%)235152$

Net income $$353$ $$228$

Dividends paid $$53$ $$48$

Addition to retained earnings $$300$ $$180$

Shares outstanding $100100$

Price $$25\mathrm{.}00$ $$22\mathrm{.}50$

WACC $10\mathrm{.}00\%$

What is the firm$$s $2018$ current ratio? Round your answer to two decimal places.

If the industry average debt$-$to$-$total$-$assets ratio is $30\%,$ then Rosnan$$s creditors have a

smaller

cushion than indicated by the industry average.

What is the firm$$s $2018$ net profit margin? Round your answer to four decimal places.

$\%$

If the industry average profit margin is $12\%,$ then Rosnan$$s lower than average debt$-$to$-$total$-$assets ratio might be one reason for its high profit margin.

True

What is the firm$$s $2018$ price$/$earnings ratio? Round your answer to two decimal places.

Using the DuPont equation, what is the firm$$s $2018$ ROE? Round your answer to two decimal places.

$\%$