Audit Analytics HW3 DuPont Case pt II&III (1)

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Jan 9, 2024

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Audit analytics HW3 DuPont Case Marlon Rodriguez Aura Santos Kevin Jimenez Francisco Lopes Part 2 Questions 1. What are the combined total assets of all companies for all years? Answer: The combined total assets of all companies for all years is 58,828,572,447,200 2. How many different companies are listed in the dataset? Answer: There are 174 different companies listed in the dataset. 3. How many different companies are there in each industry? Answer: Capital goods:29 Consumer Service:28 Finance:29 Public Utilities:29 Technology:30 Transportation:29 4. What are the total sales for each industry in 2013 (do not round your answer)? Answer: Capital goods: $873,265,248,300 Finance::$697,163,500,000 Public Utilities:$715,035,500,000 Transportation:$250,095,100,000 Consumer Services:$946,589,800,000 Technology:$636,068,447,700 5. What company had the most sales over the three year period, and what was the total amount of those sales? Answer: Wal-Mart Stores Inc. had the most sales over the 3 year period with a total amount of $1,431,200,000,000 Part 3 Questions

1. What industries for fiscal year 2015 are the highest and lowest performing for each of the following performance indicators? For measuring performance, use the median industry performance to control for the potentially large effects of outliers. Answer: ROE: Consumer Service & Public utilities Profit Margin Ratio: Finance & Technology Financial Leverage Ratio: Finance & Technology Asset Turnover: Consumer services & Finance 2. Which industry has seen the greatest improvement in median ROE from 2013 to 2015? What are the best explanations, based on the ratios in the DuPont Method,for why the ROE has improved in that Industry? Answer: The Finance Industry has seen the greatest improvement in median ROE from 2013 to 2015. The best explanation for this based on the ratios in the DuPont Method would be high profits,leverage, and asset turnover. 3. Assume you want to invest in one of the industries included in the dataset (i.e., buy stock in all companies in one industry). Which industries do you think will offer the highest and lowest return in 2016? Which industries will provide the safest and riskiest return in 2016? Does removing outliers change your opinion? Answer: We think that the Consumer Services will offer the highest return in 2016 because their ROE has been increasing each year since 2013. Their increase was very little from 2013 to 2014 but , their 2015 ROE exceeded technology leading to the assumption that they will provide the highest return in 2016 compared to other industry behaviors We believe that the Public Utilities industry will have the lowest return on investment due to the fact that they had back to back years with Low ROE returns and haven't done better than in 2013. If they were to gain more ROE it would most likely not equal or not even equal the transportation industry’s lowest ROE returns. We think the finance industry would provide the safest return in 2016. They increased each year consistently compared to the others. Even though consumer services also increased as well, the Finance industry had a greater increase because compared to consumer services, Finance had a greater percentage increase each year(2%) for ROE. Although consumer services skyrocketed, it is hard to tell what will happen in 2016 because of the drastic change. We believe that the riskiest option for return in 2016 will be technology because they seemed to have reached their best in 2013 and then saw a big drop in ROE and has been steady in the 2 following years. There is a chance for technology to gain a big boost to pass Consumer Services Removing outliers does in fact change our opinion because an outlier can affect the dataset because one large increase can cause another increase in others. Also, removing outliers would provide more reliable data. For example, removing the outlier for public utilities, the data is more balanced.

4. What companies have the best ROE within each industry for 2015? Sort the data so you can see the companies listed from highest to lowest ROE. What observations do you make about differences in ROE for the different companies? Answer: Best ROE for 2015 Capital goods: Lockheed Martin Corp. Consumer Services: Caesars Entertainment Corporation Finance: Armada Hoffler Properties Inc. Public Utilities: Inventergy Global Inc. Technology: Barracuda Networks Inc. Paragon Shipping Inc. Based on our observations, the Capital goods industry and the Transportation industry seem to be the most profitable industries because we noticed two companies from the Transportation industry and the Capital goods industry are in the top 5 ROE rankings. Also, we noticed that the Finance industry seems to have the lowest ROE which leads us to believe that that industry is not going to pass the other industries at least not any time soon. 5. Companies that have negative profit margins but are increasing their asset turnover ratio are “accelerating into a brick wall” (i.e., they are getting better at losing money). What three companies in 2015 are the worst in that they have a negative profit margin and the highest asset turnover ratio? Give the name of the company. Answer: DryShips Inc. (Transportation industry): Profit Margin Ratio= -2.9 Asset turnover ratio= 2.043 Cosi Inc. (consumer services industry) Profit margin ratio= -.2 Asset turnover ratio= 2.177 Staffing 360 Inc. (Technology industry) Profit margin ratio= -.1 Asset turnover ratio= 3.045 6. AT&T surpassed its industry ROE median although 2015 had a higher ROE than 2014. Advanced Drainage Systems INC did not reach the industry median for both years. Alphabet INC surpassed the industry ROE median both year while the technology industry’s ROE median was higher in 2015. American Airlines also surpassed their ROE median but the median only increased insignificantly from 2014 to 2015. A

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