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A fem has been experiencing low profitability in recent years. Perform an analysis of the firm's financial position using the DuPont equation, The firm has no lease payments but has a $3 million sinking fund payment on its debt. The most recent industry average ratios and the firm's financial statements are as follows Industry Average Ratios Current ratio 2x Fixed assets turnover Debt-to-capital ratio 20% Total assets turnover Times interest earned SH Profit margin Эк 3.25% EBITDA семегаре 10x Return on total assets 9.75% Inventory turnover 9x Return on commen 17.90% equity Days sales 24days Return on invested 15.40% outstanding capital "Calculation is based on a 365-day year. Balance Sheet as of December 31, 2021 (millions of dollars) Cash and equivalents $83 Accounts payable $42 Accounts receivables 71 Other current liabilities 17 Inventories 154 Notes payable 50 Total current assets $308 Total current labies $100 Long-term debt 21 Total abilities $130 Gross fixed assets 187 Common stock 100 Less depreciation 80 Retained earnings 185 Net fixed assets $307 Total stockholders' equity $285 Total assets $415 Total liabilities and equity $415 Income Statement for Year Ended December 31, 2021 (millions of dollars) 805.00 Not sales Cost of goods sold Gross profit Selling expenses EBITDA Depredation expense Earrings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Taxes (25%) Net income 660.00 $145.00 77.50 $ 67.50 14.00 $ 53.50 5.50 48.00 12.00 $ 36.00 a. Calculate the following ratios. Do not round intermediate calculations. Round your answers to two decimal places. Firm Industry Average Current ratio x 2x Debt to total capital % 20% Times interest earned x 5x EBITDA coverage x 10x Inventory turnover x 9x Days sales outstanding days 24days Fixed assets turnover × 8x Total assets turnover x 3x Profit margin % 3.25% Return on total assets % 9.75% Return on common equity % 17.90% Return on invested capital % 15.40% b. Construct a DuPont equation, and the industry. Do not round intermediate calculations. Round your answers to two decimal places. Profit margin Total assets turnover Equity multiplier Firm % x Industry 3.25% 3x

A fem has been experiencing low profitability in recent years. Perform an analysis of the firm's financial position using the DuPont equation, The firm has no lease payments but has a $3 million sinking fund payment on its debt. The most recent industry average ratios and the firm's financial statements are as follows Industry Average Ratios Current ratio 2x Fixed assets turnover Debt-to-capital ratio 20% Total assets turnover Times interest earned SH Profit margin Эк 3.25% EBITDA семегаре 10x Return on total assets 9.75% Inventory turnover 9x Return on commen 17.90% equity Days sales 24days Return on invested 15.40% outstanding capital "Calculation is based on a 365-day year. Balance Sheet as of December 31, 2021 (millions of dollars) Cash and equivalents $83 Accounts payable $42 Accounts receivables 71 Other current liabilities 17 Inventories 154 Notes payable 50 Total current assets $308 Total current labies $100 Long-term debt 21 Total abilities $130 Gross fixed assets 187 Common stock 100 Less depreciation 80 Retained earnings 185 Net fixed assets $307 Total stockholders' equity $285 Total assets $415 Total liabilities and equity $415 Income Statement for Year Ended December 31, 2021 (millions of dollars) 805.00 Not sales Cost of goods sold Gross profit Selling expenses EBITDA Depredation expense Earrings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Taxes (25%) Net income 660.00 $145.00 77.50 $ 67.50 14.00 $ 53.50 5.50 48.00 12.00 $ 36.00 a. Calculate the following ratios. Do not round intermediate calculations. Round your answers to two decimal places. Firm Industry Average Current ratio x 2x Debt to total capital % 20% Times interest earned x 5x EBITDA coverage x 10x Inventory turnover x 9x Days sales outstanding days 24days Fixed assets turnover × 8x Total assets turnover x 3x Profit margin % 3.25% Return on total assets % 9.75% Return on common equity % 17.90% Return on invested capital % 15.40% b. Construct a DuPont equation, and the industry. Do not round intermediate calculations. Round your answers to two decimal places. Profit margin Total assets turnover Equity multiplier Firm % x Industry 3.25% 3x

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A fem has been experiencing low profitability in recent years. Perform an analysis of the firm's financial position using the DuPont equation, The firm has no lease payments but has a $3 million sinking fund payment on its debt. The most recent industry average ratios and the firm's financial statements are as follows Industry Average Ratios Current ratio 2x Fixed assets turnover Debt-to-capital ratio 20% Total assets turnover Times interest earned SH Profit margin Эк 3.25% EBITDA семегаре 10x Return on total assets 9.75% Inventory turnover 9x Return on commen 17.90% equity Days sales 24days Return on invested 15.40% outstanding capital "Calculation is based on a 365-day year. Balance Sheet as of December 31, 2021 (millions of dollars) Cash and equivalents $83 Accounts payable $42 Accounts receivables 71 Other current liabilities 17 Inventories 154 Notes payable 50 Total current assets $308 Total current labies $100 Long-term debt 21 Total abilities $130 Gross fixed assets 187 Common stock 100 Less depreciation 80 Retained earnings 185 Net fixed assets $307 Total stockholders' equity $285 Total assets $415 Total liabilities and equity $415 Income Statement for Year Ended December 31, 2021 (millions of dollars) 805.00 Not sales Cost of goods sold Gross profit Selling expenses EBITDA Depredation expense Earrings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Taxes (25%) Net income 660.00 $145.00 77.50 $ 67.50 14.00 $ 53.50 5.50 48.00 12.00 $ 36.00 a. Calculate the following ratios. Do not round intermediate calculations. Round your answers to two decimal places. Firm Industry Average Current ratio x 2x Debt to total capital % 20% Times interest earned x 5x EBITDA coverage x 10x Inventory turnover x 9x Days sales outstanding days 24days Fixed assets turnover × 8x Total assets turnover x 3x Profit margin % 3.25% Return on total assets % 9.75% Return on common equity % 17.90% Return on invested capital % 15.40% b. Construct a DuPont equation, and the industry. Do not round intermediate calculations. Round your answers to two decimal places. Profit margin Total assets turnover Equity multiplier Firm % x Industry 3.25% 3x
Transcribed Image Text:A fem has been experiencing low profitability in recent years. Perform an analysis of the firm's financial position using the DuPont equation, The firm has no lease payments but has a $3 million sinking fund payment on its debt. The most recent industry average ratios and the firm's financial statements are as follows Industry Average Ratios Current ratio 2x Fixed assets turnover Debt-to-capital ratio 20% Total assets turnover Times interest earned SH Profit margin Эк 3.25% EBITDA семегаре 10x Return on total assets 9.75% Inventory turnover 9x Return on commen 17.90% equity Days sales 24days Return on invested 15.40% outstanding capital "Calculation is based on a 365-day year. Balance Sheet as of December 31, 2021 (millions of dollars) Cash and equivalents $83 Accounts payable $42 Accounts receivables 71 Other current liabilities 17 Inventories 154 Notes payable 50 Total current assets $308 Total current labies $100 Long-term debt 21 Total abilities $130 Gross fixed assets 187 Common stock 100 Less depreciation 80 Retained earnings 185 Net fixed assets $307 Total stockholders' equity $285 Total assets $415 Total liabilities and equity $415 Income Statement for Year Ended December 31, 2021 (millions of dollars) 805.00 Not sales Cost of goods sold Gross profit Selling expenses EBITDA Depredation expense Earrings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Taxes (25%) Net income 660.00 $145.00 77.50 $ 67.50 14.00 $ 53.50 5.50 48.00 12.00 $ 36.00 a. Calculate the following ratios. Do not round intermediate calculations. Round your answers to two decimal places. Firm Industry Average Current ratio x 2x Debt to total capital % 20% Times interest earned x 5x EBITDA coverage x 10x Inventory turnover x 9x Days sales outstanding days 24days Fixed assets turnover × 8x Total assets turnover x 3x Profit margin % 3.25% Return on total assets % 9.75% Return on common equity % 17.90% Return on invested capital % 15.40% b. Construct a DuPont equation, and the industry. Do not round intermediate calculations. Round your answers to two decimal places. Profit margin Total assets turnover Equity multiplier Firm % x Industry 3.25% 3x
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