Given: Use the financial statements above to calculate the firm’s DuPont ROE. Ca
ID: 2818879 • Letter: G
Question
Given:
Use the financial statements above to calculate the firm’s DuPont ROE. Calculate ROE and each
of its components for the firm and for the industry. Make a table of your results. Compare each
component and ROE to the corresponding industry number. Industry averages are as follows:
Industry average total debt to total asset ratio: 0.46
Industry average net profit margin: 7.2 percent
Industry average ROE: 15.25%
How do you find the TAT and EM for the industry (not the firm)????
Answers Given:
TAT=1.144
EM= 1.852
Explanation / Answer
ROE = PM * TAT * EM
.1525 = .072 * TAT * EM
TAT * EM = 2.118056
EM = Total Asset/Total Equity = 1/(1 - debt/asset ratio)
= 1/(1 - .46)
= 1.852
TAT = 2.118056/1.852
= 1.44
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