/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q2DQ Explain how the Du Pont system o... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 2: Q2DQ (page 74)

Explain how the Du Pont system of analysis breaks down return on assets. Also explain how it breaks down return on stockholders鈥� equity

Short Answer

Expert verified

Per the Du Pont analysis, the return on assets is computed by multiplying the net profit margin with the total assets turnover. And the return on stockholder鈥檚 equity is computed by multiplying the return on the asset with the equity multiplier.

Step by step solution

01

By the Du Pont system, return on assets is broken down as:

The return on assets is computed as follows:

Returnonassets=Netprofitmarging脳Totalassetturnover

02

By the Du Pont system, return on stockholder’s equity is broken down as:

The return on equity is computed as follows:

Returnonequity=Netprofitmargin脳Totalassetturnover脳Equitymultiplier

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Baker Oats had an asset turnover of 1.6 times per year.

b. The following year, on the same level of assets, Baker鈥檚 assets turnoverdeclined to 1.4 times and its profit margin was 8 percent. How did the returnon total assets change from that of the previous year?

Jim Short鈥檚 Company makes clothing for schools. Sales in 20X1 were

\(4,820,000. Assets were as follows:

Cash

\)163,000

Accounts receivable

889,000

Inventory

411,000

New plant and equipment

520,000

Total assets

$1,983,000

a. Compute the following:

1. Accounts receivable turnover.

2. Inventory turnover.

3. Fixed asset turnover.

4. Total asset turnover.

Inflation can have significant effects on income statements and balance sheets, and therefore on the calculation of ratios. Discuss the possible impact of inflation on the following ratios, and explain the direction of the impact based on your assumptions.

b. Inventory turnover

In January 2007, the Status Quo Company was formed. Total assets were \(544,000, of which \)306,000 consisted of depreciable fixed assets. Status

Quo uses straight-line depreciation of \(30,600 per year, and in 2007 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been \)29,000 per year each of the last 10 years. Other assets have not changed since 2007.

b. To what do you attribute the phenomenon shown in part a?

The Lancaster Corporation鈥檚 income statement is given below.

a. What is the times-interest-earned ratio?

Lancaster corporation

Sales

\(246,000

Cost of goods sold

122,000

Gross profit

\)124,000

Fixed charges (other than interest)

27,500

Income before interest and taxes

\(96,500

Interest

21,800

Income before taxes

\)74,700

Taxes (35%)

26,145

Income after taxes

$48,555
See all solutions

Recommended explanations on Business Studies Textbooks

International Business

Read Explanation

Operational Management

Read Explanation

Strategic Analysis

Read Explanation

Strategy

Read Explanation

Organizational Behavior

Read Explanation

Business Case Studies

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.