You Give me a minute to look at these financial statements and to remember what I know about the DuPont analysis. Cash Accounts receivable Inventory Current assets Balance Sheet Data $800,000 Accounts payable 1,600,000 Accruals 2,400,000 Notes payable 4,800,000 Current liabilities Long-term debt Total liabilities Common stock 3,200,000 Retained camnings Total equity $8,000,000 Total debt and equity $960,000 320,000 1,280,000 2.560,000 2,640,000 5,200,000 700.000 2.100,000 ,800,000 $8,000,000 Income Statement Data Sales $16,000,000 Cost of goods sold 8,000,000 Gross profit 8,000,000 Operating expenses 4,000,000 EBIT 4,000,000 Interest expense 470,400 EBT 3,529,600 Taxes 1,235, 360 Net Income $2,294,240 Net fixed assets 2 Total assets If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the , the total asset turnover ratio, and the And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratios provide insights into the company's effectiveness in using the company's assets, and Now, let's see your notes with your ratios, and then we can talk about possible strategies that will improve the ratios. I'm going to check the box to the side of your calculated value if your calculation is correct and leave it unchecked if your calculation is incorrect. Cepeus Manufacturing Inc. DuPont Analysis Check if Correct Ratios Asset management ratio 0 Total asset turnover Check if Correct Value Value 50.00 2.00 0 Ratios Profitability ratios Gross profit margin (6) Operating profit margin (%) Net profit margin (%) Return on equity (%) / / 22.06 28.68 / / / Financing ratios Equity multiplier 1.54 1 / / Landon OK, it looks like I've got a couple of incorrect values, so show me your calculations, and then improvement / 6 You I've just made rough calculations, so let me complete this table by inputting the components Cepeus Manufacturing Inc. DuPont Analysis Ratios Calculation Profitability ratios Numerator Denominator Gross profit margin ($) Operating profit margin (%) Net profit margin (9) Return on equity (%) Asset management ratio Total asset tumover Financing ratios Equity multiplier / SI / CA 57 You I've just made rough calculations, so let me complete this table by inputting the components of each radio and its value! Value Cepeus Manufacturing Inc. DuPont Analysis Ratios Calculation Profitability ratios Numerator Denominator Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Return on equity (%) Asset management ratio Total asset turnover Financing ratios Equity multiplier ndon I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Amelia would have been very disappointed in me if I had showed her my original work. So, now let's switch topics and identify general strategies that could be used to positively affect Cepeus's ROE. You OK, so given your knowledge of the component ratios used in the DuPont equation, which of the following strategies should improve the company's ROE? (Check all that apply.) Increase the efficiency of its assets so that it generates more sales with each dollar of asset investment and increases the company's total asset turnover. Decrease the amount of debt financing used by the company, which will decrease the total asset turnover ratio. Reduce the company's operating expenses, its cost of goods sold, and/or the interest rate on its borrowed funds because this will increase the company's net profit margin. Increase the cost and amount of assets necessary to generate each dollar of sales because it will increase the company's total asset turnover. Landon I think I understand now. Thanks for taking the time to go over this with me, and let me know when I can return the favor. SINTO Grade New S ave A Continue Continue without saving