Question

Some recent financial statements for Smolira Golf, Inc., follow.

SMOLIRA GOLF, INC. Balance Sheets as of December 31, 2018 and 2019
	2018		2019				2018		2019
Assets						Liabilities and Owners’ Equity
Current assets						Current liabilities
Cash	$	3,001	$	2,957		Accounts payable	$	2,188	$	2,670
Accounts receivable		4,732		5,711		Notes payable		1,785		2,186
Inventory		12,618		13,712		Other		97		114
Total	$	20,351	$	22,380		Total	$	4,070	$	4,970
						Long-term debt	$	14,000	$	16,760
						Owners’ equity
						Common stock
						and paid-in surplus	$	41,500	$	41,500
Fixed assets						Accumulated retained earnings		15,689		39,623
Net plant and equipment	$	54,908	$	80,473		Total	$	57,189	$	81,123
Total assets	$	75,259	$	102,853		Total liabilities and owners’ equity	$	75,259	$	102,853

SMOLIRA GOLF, INC. 2019 Income Statement
Sales			$	188,770
Cost of goods sold				126,903
Depreciation				5,263
EBIT			$	56,604
Interest paid				1,360
Taxable income			$	55,244
Taxes				19,335
Net income			$	35,909
Dividends	$	11,975
Retained earnings		23,934

Construct the DuPont identity for Smolira Golf. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter the profit margin and return on equity as a percent.)

Profit margin

Total Asset Turnover

Equity Multiplier

Return on Equity

Answer 1

- Profit Margin = (Net income/Sales)*100

Profit Margin for 2019 = ($35,909/$188,770)*100

= 19.02262%

Profit Margin for 2019 is 19.02%

- Total Asset turnover = Net sales/Total Assets

Total Asset turnover for 2019 = $188,770/$102,853

= 1.83534 times

Total Asset turnover for 2019 is 1.84 times

- Equity Multiplier = Total Assets/Total Equity

Equity Multiplier for 2019 = $102,853/$81,123

= 1.26786 times

Equity Multiplier for 2019 is 1.27 times

- ROE as per Dupon Analysis:-

ROE = Profit Margin*Total Asset turnover*Equity Multiplier

ROE = 19.02262*1.83534*1.26786

ROE = 44.26%

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