Question

Use the following financial statements for Lake of Egypt Marina, Inc.

LAKE OF EGYPT MARINA, INC. Balance Sheet as of December 31, 2015 and 2014 (in millions of dollars)
	2015			2014				2015			2014
Assets							Liabilities and Equity
Current assets:							Current liabilities:
Cash and marketable securities	$	96		$	60		Accrued wages and taxes	$	48		$	60
Accounts receivable		88			66		Accounts payable		56			72
Inventory		248			156		Notes payable		64			78
Total	$	432		$	282		Total	$	168		$	210
Fixed assets:							Long term debt:	$	252		$	180
Gross plant and equipment	$	416		$	330		Stockholders’ equity:
Less: Depreciation		88			48		Preferred stock (6 million shares)	$	6		$	6
							Common stock and paid-in surplus        (48 million shares)		48			48
Net plant and equipment	$	328		$	282		Retained earnings		326			156
Other long-term assets		40			36
Total	$	368		$	318		Total	$	380		$	210
Total assets	$	800		$	600		Total liabilities and equity	$	800		$	600

LAKE OF EGYPT MARINA, INC. Income Statement for Years Ending December 31, 2015 and 2014 (in millions of dollars)
	2015			2014
Net sales (all credit)	$	800		$	600
Less: Cost of goods sold		368			240
Gross profits	$	432		$	360
Less: Other operating expenses		40			24
Earnings before interest, taxes, depreciation, and amortization (EBITDA)	$	392		$	336
Less: Depreciation		40			36
Earnings before interest and taxes (EBIT)	$	352		$	300
Less: Interest		32			30
Earnings before taxes (EBT)	$	320		$	270
Less: Taxes		96			81
Net income	$	224		$	189
Less: Preferred stock dividends	$	6		$	6
Net income available to common stockholders	$	218		$	183
Less: Common stock dividends		48			48
Addition to retained earnings	$	170		$	135
Per (common) share data:
Earnings per share (EPS)	$	4.540		$	3.810
Dividends per share (DPS)	$	1.000		$	1.000
Book value per share (BVPS)	$	7.790		$	4.250
Market value (price) per share (MVPS)	$	15.350		$	13.150

Construct the DuPont ROA and ROE breakdowns for Lake of Egypt Marina, Inc. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

DuPont Analysis
ROA	%
ROE	%

Use the following financial statements for Lake of Egypt Marina, Inc. LAKE OF EGYPT MARINA, INC. Balance Sheet as of December 31, 2015 and 2014 (in millions of dollars) 2015 2014 2015 2014 Assets Liabilities and Equity Current assets: Current liabilities: Cash and marketable securities $ 96 $ 60 Accrued wages and taxes $ 48 $ 60 Accounts receivable 88 66 Accounts payable 56 72 Inventory 248 156 Notes payable 64 78 Total $ 432 $ 282 Total $ 168 $ 210 Fixed assets: Long term debt: $ 252 $ 180 Gross plant and equipment $ 416 $ 330 Stockholders’ equity: Less: Depreciation 88 48 Preferred stock (6 million shares) $ 6 $ 6 Common stock and paid-in surplus (48 million shares) 48 48 Net plant and equipment $ 328 $ 282 Retained earnings 326 156 Other long-term assets 40 36 Total $ 368 $ 318 Total $ 380 $ 210 Total assets $ 800 $ 600 Total liabilities and equity $ 800 $ 600 LAKE OF EGYPT MARINA, INC. Income Statement for Years Ending December 31, 2015 and 2014 (in millions of dollars) 2015 2014 Net sales (all credit) $ 800 $ 600 Less: Cost of goods sold 368 240 Gross profits $ 432 $ 360 Less: Other operating expenses 40 24 Earnings before interest, taxes, depreciation, and amortization (EBITDA) $ 392 $ 336 Less: Depreciation 40 36 Earnings before interest and taxes (EBIT) $ 352 $ 300 Less: Interest 32 30 Earnings before taxes (EBT) $ 320 $ 270 Less: Taxes 96 81 Net income $ 224 $ 189 Less: Preferred stock dividends $ 6 $ 6 Net income available to common stockholders $ 218 $ 183 Less: Common stock dividends 48 48 Addition to retained earnings $ 170 $ 135 Per (common) share data: Earnings per share (EPS) $ 4.540 $ 3.810 Dividends per share (DPS) $ 1.000 $ 1.000 Book value per share (BVPS) $ 7.790 $ 4.250 Market value (price) per share (MVPS) $ 15.350 $ 13.150 Construct the DuPont ROA and ROE breakdowns for Lake of Egypt Marina, Inc. (Do not round intermediate calculations. Round your answers to 2 decimal places.) DuPont Analysis ROA % ROE %

Answer 1

	Average Total Assets=(800+600)/2=	$700
	Average Total Equity=(380+210)/2	$        295
	Net Income	$        224
	Net Income available to equity holders	$        218
	ROE(Return on Equity)=Net Profit margin*Asset Turnover Ratio*Financial Leverage
	ROE=(Net Income/Sales)*(Sales/Total assets)*(Total assets/Total Equity)
	ROE=(218/800)*(800/700)*(700/295)	0.738983
	ROE=	73.90%
	ROA=Net Income /Total Assts=224/700	0.32
	ROA=	32.0%