Quiz 1 - DuPont analysis

# Quiz 1 - DuPont analysis - net income = \$1.95 million...

This preview shows pages 1–2. Sign up to view the full content.

net income = \$1.95 million effective tax rate = 35% interest expense = \$400,000 asset turnover = 2.0 \$15 million in total assets - \$7 million is debt -------- Equity = total assets - debt = \$8 million ROE% = net income/equity = 0.2438 = 24.38% --------- Leverage ratio (aka Equity Multiplier) = assets/equity = \$15 million/\$8 million = 1.875 -------- Asset turnover = sales/assets Sales = total assets * asset turnover ratio = 15 million * 2.0 = 30 million Asset turnover = 2.0 --------- Profit margin = EBIT/sales = 3,400,000/30000000 = -26,600,000 EBIT = net income/(1-tax rate) + interest = 1.95 million/(1-0.35)+400,000 = 3,400,000 --------- Debt burden ratios = net income(net income + interest) = 1.95 million (1.95 million+400,000) ---------- Explaining what each one of these tells you about the health of a company: ROE stands for Return on Equity. This return measures a corporation’s profitability by revealing how much profit a company generates with the money shareholders have invested. This is a calculation many investors use to determine the health of a company based on their return on common equity.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Leverage ratio helps generate an idea of the financial methods used within the company, but also
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern