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ExtraCreditFSAExercise

# ExtraCreditFSAExercise - Jared Lindenberg Kiss Sect 0701...

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Jared Lindenberg Kiss – Sect: 0701 2/23/11 Company: Flowserve Extra Credit Financial Statement and Ratio Analysis Chapter 4 Go to the income statement and balance sheet for your company. Calculate the DuPont ratio – long form, in other words, calculate profit margin, total asset turnover and equity multiplier and multiply the three together to calculate return on equity. Show all of your work and include your I/S and B/S with your assignment. Write a short paragraph about the sources of ROE for your company. Is ROE high or low because profit margins are high or low? Or, because asset turnover or financial leverage are high or low? There is a video posted on blackboard talking about a Dupont analysis. ROE = Profit Margin x Total Assets Turnover x Equity Multiplier ROE = (NI/Sales) x (Sales/TA) x (TA/Equity) ROE = (427,890,000/4,365,260,000) x (4,365,260,000/4,217,570,000) x (4,217,570,000/1,801,750,000*) *4,217,570,000-2,415,820,000 ROE = .098 x 1.035 x 2.341 ROE = .2374 or 23.74% Flowserve Corporation, the commercial valve and seal manufacturing company, has an ROE of 23.74%, which according to Hoovers.com, is higher than its direct competitors, ITT Corp, Metso, and John Crane, is more than double the industry median of 10.10% Flowserve’s net profit margin is also higher than its direct competitors, which

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