Question

Use the information provided below to answer questions a, b and c. Company DEF Company GHI...

Use the information provided below to answer questions a, b and c. Company DEF Company GHI Total Sales = $8,000 Total Sales = $8,000 Net Income = $1,000 Net Income = $1,333 Total Assets = $40,000 Total Assets = $30,000 Total Equity = $10,000 Total Equity = $13,333
a. Construct a DuPont Model for Company DEF
b. Construct a DuPont Model for Company GHI
c. Given the information in a and b above, is one firm more profitable AND more efficient?

Homework Answers

Answer #1

a)

For DEF Co,

Total Sales = $ 8000

net Income = $ 1000

Total assets = 40,000

Total Equity = 10,000

Using DuPont , Return on Equity (ROE) = Profitability * Asset turnover * Leverage

= (Net Income/Total Sales) * (Sales/ Total Assets) * (Assets/ Total Equity)

= (1000/8000) * (8000/40,000) * (40,000/10,000) = 0.125 * 0.2 * 4 = 10%

For GHI

Total Sales = $ 8000

net Income = $ 1333

Total assets = 30,000

Total Equity = 13,333

Using DuPont , Return on Equity (ROE) = Profitability * Asset turnover * Leverage

= (Net Income/Total Sales) * (Sales/ Total Assets) * (Assets/ Total Equity)

= (1,333/8000) *(8000/30,000) * (30,000/13,333)

= 0.167 * 0.267 * 2.25 = 9.997%

c)

From above Firm GHI is more profitable with 16.7% and efficient with 0.267 times against 12.5% and 0.2 times for DEF respectively.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
. Financial statements of ABC company for the year 2018 is provided below. Company expects to...
. Financial statements of ABC company for the year 2018 is provided below. Company expects to its sales, costs and total assets to grow 20% in year 2019. Interest expense in 2019 will be 10% of long-term debt outstanding at the start of the year. If company plans to maintain current payout ratio in 2019, how much external financing will the firm require in 2019? Tax rate will remain constant. INCOME STATEMENT, 2018 Sales $200,000 Costs 150,000 EBIT 50,000 Interest...
Use the statements below to answer the questions that follow: Income Statement for the Year Ended,...
Use the statements below to answer the questions that follow: Income Statement for the Year Ended, December 31, 2017 Sales 150,000 Expenses Cost of Goods Sold 80,000 Operating Expenses 30,000 EBIT (aka Operating Profit) 40,000 Interest 8,000 Income Tax 13,000 Total Expenses 131,000 Net Operating Income 19,000 Other Income Gain on Sale of Equipment 10,000 Net income 29,000 Balance Sheet 31-Dec-17 31-Dec-16 Assets Current Assets Cash 95,000 78,000 Accounts Receivable 60,000 82,000 Finished Goods 25,000 50,000 Materials Inventory 110,000 80,000...
P3-36: DuPont system of analysis Use the following 2016 financial information for ATT and Verizon to...
P3-36: DuPont system of analysis Use the following 2016 financial information for ATT and Verizon to conduct a DuPont system of analysis for each company. ATT Verizon Sales $163,786 $125,980 Earnings available for common stockholders 13,333 13,608 Total assets 403,821 244,180 Stockholders’ equity 124,110 24,032 Which company has the higher net profit margin? Higher asset turnover? Which company has the higher ROA? The higher ROE?
Use the balance sheets and information provided about revenue and expenses to answer the question. Ruston...
Use the balance sheets and information provided about revenue and expenses to answer the question. Ruston Company Balance Sheet As of December 31, 2017 (amounts in thousands) Cash 90,000 Accounts Payable 12,000 Accounts Receivable 34,000 Debt 36,000 Inventory 51,000 Other Liabilities 21,000 Property Plant & Equipment, Gross 230,000 Total Liabilities 69,000 Accumulated Depreciation 55,000 Paid-In Capital 59,000 Property Plant & Equipment, Net 175,000 Retained Earnings 228,000 Other Assets 6,000 Total Equity 287,000 Total Assets 356,000 Total Liabilities & Equity 356,000...
The DEF Company is considering an investment in a new product. The information for one year...
The DEF Company is considering an investment in a new product. The information for one year is as shown in Table 3.19 . Compute the cash flow that can be used in the present value computations of this investment. Table 3.19 New production information Sales 200,000 Manufacturing costs of sales (includes $20,000 of depreciation) 80,000 Selling and administrative expenses (directly associated with the product) 40,000 Equipment purchases 10,000 Decrease in contribution of other products 5,000 Increase in accounts receivable 15,000...
Compute Measures for DuPont Disaggregation Analysis Use the information below for 2018 for 3M Company to...
Compute Measures for DuPont Disaggregation Analysis Use the information below for 2018 for 3M Company to answer the requirements (perform these computations from the perspective of a 3M shareholder). ($ millions) 2018 2017 Sales $32,765 Net income, consolidated 5,363 Net income attributable to 3M shareholders 5,349 Assets 36,500 $37,987 Total equity 9,848 11,622 Equity attributable to 3M shareholders 9,796 11,563 a. Compute return on equity (ROE).   Round answer to two decimal places (ex: 0.12345 = 12.35%) b. Compute the DuPont...
USE THE INFORMATION BELOW TO ANSWER THE FOLLOWING 3 QUESTIONS Mellon Company Balance Sheet For the...
USE THE INFORMATION BELOW TO ANSWER THE FOLLOWING 3 QUESTIONS Mellon Company Balance Sheet For the Years Ending December 31, 2017 and 2018 (All figures in dollars) 2017 2018 Cash 1,400 1,820 Accounts receivable 7,520 6,870 Inventory 6,450 7,180 Total current assets 15,370 15,870 Gross fixed assets 102,860 108,960 (Accumulated depreciation) (14,980) (16,470) Net fixed assets 87,880 92,490 Land 12,560 14,860 Total assets 115,810 123,220 Notes payable 1,870 1,960 Accounts payable 820 960 Accruals 480 380 Current portion of LT...
Use the balance sheets and information provided about revenue and expenses to answer the question. Gulf...
Use the balance sheets and information provided about revenue and expenses to answer the question. Gulf Shipping Company Balance Sheet As of December 31, 2017 (amounts in thousands) Cash 143,000 Accounts Payable 19,000 Accounts Receivable 41,000 Debt 32,000 Inventory 58,000 Other Liabilities 40,000 Property Plant & Equipment, Gross 210,000 Total Liabilities 91,000 Accumulated Depreciation 62,000 Paid-In Capital 77,000 Property Plant & Equipment, Net 148,000 Retained Earnings 229,000 Other Assets 7,000 Total Equity 306,000 Total Assets 397,000 Total Liabilities & Equity...
Use the balance sheets and information provided about revenue and expenses to answer the question. Hopewell...
Use the balance sheets and information provided about revenue and expenses to answer the question. Hopewell Corporation Balance Sheet As of December 31, 2019 (amounts in thousands) Cash 125,000 Accounts Payable 24,000 Accounts Receivable 36,000 Debt 37,000 Inventory 52,000 Other Liabilities 30,000 Property Plant & Equipment, Gross 226,000 Total Liabilities 91,000 Accumulated Depreciation 59,000 Paid-In Capital 56,000 Property Plant & Equipment, Net 167,000 Retained Earnings 239,000 Other Assets 6,000 Total Equity 295,000 Total Assets 386,000 Total Liabilities & Equity 386,000...
Below is information for year ended 12/31/15 for Company A and Company B. Company A Company...
Below is information for year ended 12/31/15 for Company A and Company B. Company A Company B Interest expense $ 400 $ 0 Tax expense (40%) 400 400 Net income 600 600 Total assets 10,000 10,000 Total debt 5,000 0 Equity 5,000 10,000 Company A capitalized $100 in interest costs, the pension obligation, during the year. Times interest earned ratio, after necessary adjustments, for Company A is: Group of answer choices 2.8 1.2 3.5 2.0