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The DuPont equation shows the relationships among asset management, debt management, and ratios. Management can use the DuPont equation to analyze ways of improving the
The DuPont equation shows the relationships among asset management, debt management, and 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. factors also need to be considered.Quantitative Problem: Rosnan Industries' and balance sheets and income statements are shown below.Balance Sheets: Cash and equivalents$$Accounts receivableInventories Total current assets$$Net plant and equipmentTotal assets$$ Accounts payable$$AccrualsNotes payable Total current liabilities$$Longterm debtCommon stockRetained earningsTotal liabilities and equity$$Income Statements: Sales$$Operating costs excluding depreciationEBITDA$$Depreciation and amortizationEBIT$$InterestEBT$$Taxes Net income$$ Dividends paid$$Addition to retained earnings$$ Shares outstandingPrice$$WACC What is the firm's current ratio? Round your answer to two decimal places.The current ratio indicates that Rosnan has current assets to meet its current obligations as they come due.What is the firm's total assets turnover ratio? Round your answer to four decimal places.Given the current and total assets turnover ratios calculated above, if Rosnan's quick ratio is then an analyst might conclude that Rosnan's fixed assets are managed What is the firm's debttocapital ratio? Round your answer to two decimal places. If the industry average debttocapital ratio is then Rosnan's creditors have a cushion than indicated by the industry average.What is the firm's profit margin? Round your answer to two decimal places. If the industry average profit margin is then Rosnan's lower than average debttocapital ratio might be one reason for its high profit margin. What is the firm's priceearnings ratio? Round your answer to two decimal places.Using the DuPont equation, what is the firm's ROE? Round your answer to two decimal places.
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