DuPont Analysis A fem has been experiening low proftability in recent yearsPm an

Question

DuPont Analysis

A fem has been experiening low proftability in recent yearsPm an analysis of the fm's financial posicion using the DuPont equation. The most recent industry average ratios and the frm's financial statements are as follows The rm has no lease payments but has a s2 mion sinking fund payment on s de Industry Average Ratios Current ratio 412 Fxed assets turnov .00 .66 3.54% 13.66% 18.30% 16.65% to capital ratio 17.07% Total assets turnover Times interest earned on total vetory tunove Days sales outstanding Calculation s based on a 365-day year 3.39n c .6 daysm on vested

Explanation / Answer

DuPont Formula : DuPont break the formula for ROE and ROA and provide more detailed view to the management. Return on equity = Net income/Total equity = (Net income/total sales)*(Total sales/Total asset)*(total asset/Total equity) = Net margin*Asset turn over * equity multiplier = Return on Asset * equity multiplier Return on Asset = Net income/Asset = (Net income/total sales)*(total sales/total asset) = Net margin*Asset turnover = ROE/Equity multiplier

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