Ratios Profitability ratios Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Return on equity (%) Asset management ratio Total assets turnover Financial ratios Equity multiplier Calculation Numerator 1 Denominator || Value 100
Ratios Profitability ratios Gross profit margin (%) Operating profit margin (%) Net profit margin (%) Return on equity (%) Asset management ratio Total assets turnover Financial ratios Equity multiplier Calculation Numerator 1 Denominator || Value 100
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
Related questions
Concept explainers
Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
Topic Video
Question

Transcribed Image Text:JASON: Do you have 10 or 15 minutes that you can spare?
YOU: Sure, I've got a meeting in an hour, but I don't want to start something new and then be interrupted by the meeting, so how
can I help?
JASON: I've been reviewing the company's financial statements and looking for ways to improve our performance, in general, and
the company's return on equity, or ROE, in particular. Anja, my new team leader, suggested that I start by using a DuPont
analysis, and I'd like to run my numbers and conclusions by you to see whether I've missed anything.
Here are the balance sheet and income statement data that Anja gave me, and here are my notes with my calculations. Could
you start by making sure that my numbers are correct?
YOU: Give me a minute to look at these financial statements and to remember what I know about the DuPont analysis.
Balance Sheet Data
Cash
Accounts receivable
Inventory
Current assets
Net fixed assets
Total assets
$1,000,000 Accounts payable
2,000,000
Accruals
3,000,000
6,000,000
4,000,000
$10,000,000
Notes payable
Current liabilities
Long-term debt
Total liabilities
Common stock
Retained earnings
Total equity
Total debt and equity
$1,200,000
400,000
1,600,000
3,200,000
2,300,000
5,500,000
1,125,000
3,375,000
4,500,000
$10,000,000
Income Statement Data
Sales
Cost of goods sold
Gross profit
Operating expenses
EBIT
Interest expense
EBT
Taxes
Net income
$20,000,000
10,000,000
10,000,000
5,000,000
5,000,000
468,000
4,532,000
1,133,000
$3,399,000

Transcribed Image Text:JASON: OK, it looks like I've got a couple of incorrect values, so show me your calculations, and then we can talk strategies for
improvement.
YOU: I've just made rough calculations, so let me complete this table by inputting the components of each ratio and its value:
Do not round intermediate calculations and round your final answers up to two decimals.
Cepeus Manufacturing Inc. DuPont Analysis
Ratios
Profitability ratios
Gross profit margin (%)
Operating profit margin (%)
Net profit margin (%)
Return on equity (%)
Asset management ratio
Total assets turnover
Financial ratios
Equity multiplier
Calculation
Numerator
Denominator
Value
TITLO
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