***PLEASE SHOW STEPS!!! (performance evaluation, DuPont method) Use the followin

Question

***PLEASE SHOW STEPS!!!

(performance evaluation, DuPont method)

Use the following data for Apple and Dell for year 2008 (real data, in $ million):

Required:

a) compute the ROI for each company.
   Apple ROI= _____% (if you get say 12.5%, enter 12.5, not 12.5% or 0.125)
   Dell ROI= _______%

b) use the DuPont method to decompose ROI into ROI = profit margin * asset turnover.
In other words, compute profit margin and asset turnover for each company:
   Apple profit margin= ______ asset turnover= _______ (Enter both as a fraction of 1, not as percentage. I.e., if the profit margin is 0.045 (4.5%) and asset turnover is 3.42 (342%), enter 0.045 and 3.42)
   Dell profit margin= ______ , asset turnover= ______
If you multiply profit margin * asset turnover, you should get the ROI from part (a)


c) Which company has higher profit margin? Does it make sense, based on what you know about Apple and Dell?

Apple Dell Profit (operating income) $6,275 $3,190 Sales revenue $32,479 $61,101 Investment (total assets) $32,460 $27,031

Explanation / Answer

Apple has the higher profit margin.

Company name Apple S.No Ratio Formula Detail Result 1 ROI Net Income/Total Assets (6275/32460) 19.33 2 Profit margin Net Income/Total Sales (6275/32479) 0.1932 3 Asset Turnover ROI/Profit Margin (19.33/0.1932) 1.001 Company name Dell S.No Ratio Formula Detail Result 1 ROI Net Income/Total Assets (3190/27031) 11.80 2 Profit margin Net Income/Total Sales (3190/61101) 0.0522 3 Asset Turnover ROI/Profit Margin (11.80/0.0522) 2.260

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