Walking down the hall of your office building with a sheaf of papers in his hand, your friend and colleague, Akira, stepped into your office and asked the following. Canis Major Veterinary Supplies Inc. DuPont Analysis

$\backslash$table$[[$Ratios$,$Value,Correct$/$Incorrect$,$Ratios,Value,Correct$/$Incorrect$],[$Profitability ratios,,,Asset management ratio,,$],[$Gross profit margin $(\%),40\mathrm{.}00,$Correct grad,Total asset tumover,$1\mathrm{.}67,$Correct grad$],[$Operating profit margin $(\%),12\mathrm{.}00,$Incorrect grad,,,$],[$Net profit margin $(\%),13\mathrm{.}00,$Incorrect grad,Financial ratios,,$],[$Retum on equity $(\%),39\mathrm{.}43,$Incorrect grad,Equity multiplier,$1\mathrm{.}82,$Incorrect grad$]]$

AKIRA: OK$,$ it looks like I've got a couple of Incorrect values, so show me your calculations, and then we can talk strategles for Improvement.

You: I've just made rough calculations, so let me complete thls table by inputting the components of each ratio and its value:

Note: Do not round intermedlate calculations. Round final answers to the nearest whole number.

Canis Major Veterinary Supplies Inc. DuPont Analysis

$\backslash$table$[[,$Calculation,,,Value$],[$Profitability ratios,Numerator,Denominator$],[$Gross profit margin $(\%),$l$,,=,],[$Operating profit margin $(\%),$l$,,=,],[$Net profit margin $(\%),$l$,,=,],[$Return on equity $(\%),$l$,,=,],[$Asset management ratio$],[$Total asset turnover,$1,,=,],[$Financing ratios$],[$Equity multiplier,$1,,=,]]$

AKIRA: Do you have $10$ or $15$ minutes that you can spare?

YOU: Sure, I$$ve got a meeting in an hour, but I don$$t want to start something new and then be interrupted by the meeting, so how can I help?

AKIRA: I$$ve been reviewing the company$$s financial statements and looking for general ways to improve our performance, in general, and the company$$s return on equity, or ROE, in particular. Emma, my new team leader, suggested that I start by using a DuPont analysis, and I$$d like to run my numbers and conclusions by you, to see if I$$ve missed anything.

Here are the balance sheet and income statement data that Emma gave me$,$ and here are my notes with my calculations. Could you start by making sure that my numbers are correct?

YOU: Give me a minute to look at these financial statements and to remember what I know about the DuPont analysis.$\backslash$table$[[,$Balance Sheet Data,,,Income Statement Data$],[$Cash$,$$$1,300,000,$Accounts payable,$$1,560,000,$Sales,$$26,000,000],[$Accounts recelvable,$2,600,000,$Accruals,$520,000,$Cost of goods sold,$15,600,000],[$Inventory$,3,900,000,$Notes payable,$2,080,000,$Gross profit,$$10,400,000],[$Current assets,$$7,800,000,$Current Ilabilitles,$$4,160,000,$Operating expenses,$6,500,000],[,,$Long$-$term debt,$4,420,000,$EBIT,$$3,900,000]]$

If I remember correctly, the DuPont equation breaks down our ROE Into three component ratios: the

$\_r$ the total asset turnover ratio, and the

And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratios provide insights Into the company's

effectiveness in using the company's assets, and

Now, let's see your notes with your ratios, and then we can talk about possible strategles that will improve the ratios. In the dropdown lists next to your values I$\text{'}$m golng to select correct if your calculation is correct and incorrect if your calculation is incorrect.