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BOEING CO had the following balance sheet information (all dollars are in millions) at the end...

BOEING CO had the following balance sheet information (all dollars are in millions) at the end of December, 2015 and 2014. Total assets were $94,408.0, and $99,198.0, respectively. Total liabilities were $88,011.0, and $90,408.0, respectively. For the years ended December, 2015 and 2014, BOEING CO's sales were $96,114.0 and $90,762.0, and its net income was $5,176.0 and $5,446.0, respectively. What is the capital structure leverage (financial leverage) for BOEING CO for 2015? Please answer my question need the answer now

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Answer #1

Acording to the Du Pont equation,

Return on equity = Net profit margin * Total Assets turnover ratio * Financial leverage

since,

Net income / Average shareholders' Equity = (Net income/Sales)*(Sales/Average total Assets)*(Average total Assets/Average shareholders' Equity)

Equity for both years can be found as (Total assets - Total liabilities)

Equity for 2015 = $94,408 - $88,011 = $6,397

Equity for 2014 = $99,198 - $90,408 = $8,790

Average shareholders' equity in 2015 = ($6,397+$8,790)/2

= $7,593.50

ROE (2015) = $5,176 / $7,593.50

= 0.6816 or 68.16%

Net margin (2015) = $5,176 / $96,114
= 0.0538 or 5.38%

Average total assets in 2015 = ($94,408 + $99,198)/2

= $96,803

So, total assers turnover in 2015 = $96,114 / $96,803

= 0.99

Putting all ratios for 2015 in the DuPont equation,

0.6816 = 0.0538 * 0.99 * Financial leverage

Financial leverage = 0.6816 / 0.0533

12.78 times

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