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28 Sep 2019
Didyoustudy, Inc. has net income of $1,750,000, an asset turnover of 2.5, and $15 million in total assets, of which $8 million is debt. Use the Du Pont system to calculate its ROE, decomposed into ROA, Total asset turnover, profit margin, and the equity multiplier. MAKE SURE TO SHOW ALL YOUR WORK
Didyoustudy, Inc. has net income of $1,750,000, an asset turnover of 2.5, and $15 million in total assets, of which $8 million is debt. Use the Du Pont system to calculate its ROE, decomposed into ROA, Total asset turnover, profit margin, and the equity multiplier. MAKE SURE TO SHOW ALL YOUR WORK
Irving HeathcoteLv2
28 Sep 2019
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Data for Barry Computer Co. and its industry averages follow.
| Barry Computer Company: | ||||
| Balance Sheet as of December 31, 2012 (In Thousands) | ||||
| Cash | $159,750 | Accounts payable | $191,700 | |
| Receivables | 559,125 | Notes payable | 95,850 | |
| Inventories | 415,350 | Other current liabilities | 127,800 | |
| Total current assets | $1,134,225 | Total current liabilities | $415,350 | |
| Long-term debt | $479,250 | |||
| Net fixed assets | 463,275 | Common equity | 702,900 | |
| Total assets | $1,597,500 | Total liabilities and equity | $1,597,500 | |
| Barry Computer Company: Income Statement for Year Ended December 31, 2012 (In Thousands) | |||
| Sales | $2,250,000 | ||
| Cost of goods sold | |||
| Materials | $922,500 | ||
| Labor | 630,000 | ||
| Heat, light, and power | 67,500 | ||
| Indirect labor | 180,000 | ||
| Depreciation | 45,000 | $1,845,000 | |
| Gross profit | $405,000 | |
| Selling expenses | 225,000 | |
| General and administrative expenses | 67,500 | |
| Earnings before interest and taxes (EBIT) | $112,500 | |
| Interest expense | 43,133 | |
| Earnings before taxes (EBT) | 69,367 | |
| Federal and state income taxes (40%) | 27,747 | |
| Net income | $41,620 |
Calculate the indicated ratios for Barry. Round your answers to two decimal places.
| Ratio | Barry | Industry Average |
| Current | x | 2.70x |
| Quick | x | 1.75x |
| Days sales outstandinga | days | 42.38days |
| Inventory turnover | x | 5.91x |
| Total assets turnover | x | 1.59x |
| Net profit margin | % | 1.73% |
| ROA | % | 2.74% |
| ROE | % | 6.30% |
| Total debt/total assets | % | 56.52% |
aCalculation is based on a 365-day year.
Construct the extended Du Pont equation for both Barry and the industry. Round your answers to two decimal places.
| FIRM | INDUSTRY | |
| Net profit margin | % | 1.73% |
| Total assets turnover | x | 1.59x |
| Equity multiplier |
