A firm 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. Themost recent industry average ratios and the firm's financial statements are as follows:Industry Average RatiosCurrent ratioDebt-to-capital ratioTimes interest earnedEBITDA coverageInventory turnoverCash and equivalentsAccounts receivablesInventoriesTotal current assets2x17%3 x6 x11 xDays salesoutstandingaCalculation is based on a 365-day year.Balance Sheet as of December 31, 2021 (millions of dollars)$78Accounts payableOther current liabilities51125Notes payable$ 254Total current liabilitiesLong-term debtTotal liabilitiesCommon stockRetained earningsTotal stockholders' equityTotal liabilities and equityGross fixed assetsLess depreciationNet fixed assetsTotal assets15 daysFixed assets turnoverTotal assets turnoverProfit marginReturn on total assetsReturn on commonequity19155$ 136$ 390—Return on investedcapital6 x4x2.50%10.00%14.70%14.40%$312043$9416$ 11090190$280$390— Income Statement for Year Ended December 31, 2021 (millions of dollars)$ 795.00680.00$115.0063.5051.5010.0041.505.5036.009.00Taxes (25%)Net income$ 27.00a. Calculate the following ratios. Do not round intermediate calculations. Round your answers to two decimal places.FirmIndustry AverageXNet salesCost of goods soldGross profitSelling expensesEBITDADepreciation expenseEarnings before interest and taxes (EBIT)Interest expenseEarnings before taxes (EBT)Current ratioDebt to total capitalTimes interest earnedEBITDA coverageInventory turnoverProfit marginTotal assets turnover2Equity multiplier337.679.936.6732.975.241.584.306.7010.104,301.58X×X2.50XX%Days sales outstandingFixed assets turnoverTotal assets turnoverProfit marginReturn on total assetsReturn on common equityReturn on invested capital14.40%7.20b. Construct a DuPont equation, and the industry. Do not round intermediate calculations. Round your answers to two decimal places.FirmIndustry2.50%XXX daysXXXXX%%%%%X$X$$2x17%3x6 x11 x15 days6 x44x2.50%10.00%14.70%4xX

The different financial ratios used for the analysis of the company performance are divided…

A firm has been experiencing low profitability in recent years. Perform an analysis of the firm's financial positio most recent industry average ratios and the firm's financial statements are as follows: Industry Average Ratios Current ratio Debt-to-capital ratio Times interest earned EBITDA coverage Inventory turnover Cash and equivalents Accounts receivables Inventories Days sales outstanding *Calculation is based on a 365-day year. Balance Sheet as of December $ 78 51 125 $254 Total current assets Gross fixed assets Less depreciation Fixed assets turnover Total assets turnover Profit margin Return on total assets Return on common equity 15 days Return on invested capital Net fixed assets Total assets 2x 17% 3x 6x 11x 191 55 $ 136 $390 31, 2021 (millions of dollars) Accounts payable Other current liabilities Notes payable Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and equity 6x 4x 2.50% 10.00% 14.70% 14.40% $31 20 43 $94 16 $110 90 190 $280 $390

A firm has been experiencing low profitability in recent years. Perform an analysis of the firm's financial positio most recent industry average ratios and the firm's financial statements are as follows: Industry Average Ratios Current ratio Debt-to-capital ratio Times interest earned EBITDA coverage Inventory turnover Cash and equivalents Accounts receivables Inventories Days sales outstanding *Calculation is based on a 365-day year. Balance Sheet as of December $ 78 51 125 $254 Total current assets Gross fixed assets Less depreciation Fixed assets turnover Total assets turnover Profit margin Return on total assets Return on common equity 15 days Return on invested capital Net fixed assets Total assets 2x 17% 3x 6x 11x 191 55 $ 136 $390 31, 2021 (millions of dollars) Accounts payable Other current liabilities Notes payable Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and equity 6x 4x 2.50% 10.00% 14.70% 14.40% $31 20 43 $94 16 $110 90 190 $280 $390

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter5: Evaluating Operating And Financial Performance

Section: Chapter Questions

Problem 9EP

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A firm has been experiencing low profitability in recent years. Performan analysis of the firm’s financial position using the DuPont equation. The firm has no leasepayments but has a $2 million sinking fund payment on its debt. The most recent industryaverage ratios and the firm’s financial statements are as follows: a. Calculate the ratios you think would be useful in this analysis.b. Construct a DuPont equation, and compare the company’s ratios to the industry averageratios.c. Do the balance sheet accounts or the income statement figures seem to be primarilyresponsible for the low profits?d. Which specific accounts seem to be most out of line relative to other firms in the industry?e. If the firm had a pronounced seasonal sales pattern or if it grew rapidly during theyear, how might that affect the validity of your ratio analysis? How might you correctfor such potential problems?
A firm 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 $1 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 Debt-to-capital ratio Times interest earned EBITDA coverage Inventory turnover Cash and equivalents Accounts receivables Inventories Total current assets Gross fixed assets Less depreciation Days sales outstandinga aCalculation is based on a 365-day year. Balance Sheet as of December 31, 2021 (millions of dollars) $78 Accounts payable Other current liabilities Net fixed assets Total assets Gross profit Selling expenses EBITDA 2x 15% 5x 10x 9x 25days Taxes (25%) Net income 74 147 $299 216 55 $161 $460 Depreciation expense Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Fixed assets turnover…
A firm 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 $1 million sinking fund payment on its debt. The most recent Industry average ratios and the firm's financial statements are as follows: Current ratio Debt-to-capital ratio Times interest earned EBITDA coverage Inventory turnover Days sales outstanding *Calculation is based on a 365-day year. Cash and equivalents Accounts receivables Inventories Total current assets Gross fixed assets Less depreciation Industry Average Ratios Net fixed assets Total assets 2x 15% 5x 10x 9x Balance Sheet as of December 31, 2021 (millions of dollars) $ 78 Accounts payable 74 Other current liabilities Notes payable Taxes (25%) Net Income 25days 147 $299 216 55 $161 $460 Fixed assets turnover Profit margin Total assets turnover Equity multiplier Total assets turnover Profit margin Return on total assets Return on common…
A firm 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 $1 million sinking fund payment on its debt. The most recent industry average ratios and the firm's financial statements are as follows: Current ratio Debt-to-capital ratio Times interest earned EBITDA coverage Inventory turnover Cash and equivalents Accounts receivables Inventories Total current assets Gross fixed assets Days sales outstandinga aCalculation is based on a 365-day year. Balance Sheet as of December 31, 2021 (millions of dollars) $78 Accounts payable 74 147 $299 Less depreciation Industry Average Ratios Net fixed assets. Total assets 2x 15% 5x 10x 9x 25days Fixed assets turnover Total assets turnover Profit margin Return on total assets Return on common equity Return on invested capital 216 55 $161 $460 Other current liabilities Notes payable Total current liabilities Long-term debt Total…
A firm 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 2 × Fixed assets turnover 6 × Debt-to-capital ratio 19 % Total assets turnover 3 × Times interest earned 7 × Profit margin 5.75 % EBITDA coverage 9 × Return on total assets 17.25 % Inventory turnover 7 × Return on common equity 19.40 % Days sales outstandinga 23 days Return on invested capital 17.30 % aCalculation is based on a 365-day year. Balance Sheet as of December 31, 2021 (millions of dollars) Cash and equivalents $ 77 Accounts payable $ 48 Accounts receivables 72 Other current liabilities 29 Inventories 178 Notes payable 58 Total current assets $ 327…
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Analyze and compare the following firms financial ratio results. Which seems to be in a better financial position? Why? Ratio Firm A Firm B Debt-To-Equity 0.65 2.23 Current Ratio 1.74 0.83 Net Profit Margin 8.07% 9.59% Return On Equity 12.81% 47.17% -
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