Question

Ivanhoe Corporation recently filed the following financial statements with the SEC.

Ivanhoe Corporation Income Statement for the Fiscal Year Ended July 31, 2017
Net sales		$58,589
Cost of products sold		41,674
Gross profit		$16,915
Selling, general, and administrative expenses		7,466
Depreciation		848
Operating income (loss)		$8,601
Interest expense		519
Earnings (loss) before income taxes		$8,082
Income taxes		2,829
Net earnings (loss)		$5,253

Ivanhoe Corporation Balance Sheet as of July 31, 2017
Assets				Liabilities and Stockholders’ Equity
Cash and marketable securities		$5,836		Accounts payable		$4,083
Accounts receivable		6,275		Accrued and other liabilities		3,624
Inventory		7,120		Taxes payable		3,085
Deferred income taxes		702		Debt due within one year		6,898
Prepaid expenses & other receivables		2,242		Total current liabilities		$17,690
Total current assets		$22,175
Property, plant, and equipment, at cost		49,974		Long-term debt		19,420
Less: Accumulated depreciation		17,757		Deferred income taxes		5,522
Net property, plant, and equipment		$32,217		Other non-current liabilities		4,486
Net goodwill and other intangible assets		13,020		Total liabilities		$47,118
				Common stock		2,934
				Retained earnings		17,360
				Total stockholders’ equity		20,294
Total assets		$67,412		Total liabilities and stockholders’ equity		$67,412

Use the DuPont identity to calculate the return on equity (ROE). In the process, calculate the following ratios: net profit margin, total asset turnover, equity multiplier, EBIT return on assets (EROA), and return on assets. (Do not round intermediate calculations. Round answers to 2 decimal places, e.g. 52.75 or 52.75%.)

Net profit margin		%
Total asset turnover
Equity multiplier
EBIT return on assets		%
Return on assets		%
Return on equity		%

Answer 1

	Formula	Calculation
Net profit margin	Net income / Sales	= 5253 / 58589	8.97%
Total asset turnover	Sales / Total assets	= 58589 / 67412	0.87
Equity multiplier	Total assets / Total Equity	= 67412 / 20294	3.32
ROE using Dupont	Net margin * Asset turnover * Equity multiplier	= 8.965% * 0.8691 * 3.3217	25.88%
EBIT return on assets	EBIT / Total assets	= 8601 / 67412	12.76%
Return on assets	Net income / Total assets	= 5253 / 67412	7.79%
Return on equity	Net income / Total equity	= 5253 / 20294	25.88%