78 return on assets roa net income return total

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Unformatted text preview: uting Market Value Computing Measures Measures Market Price = $87.65 per share Shares outstanding = 190.9 million PE Ratio = Price per share / Earnings per PE share share 87.65 / 3.61 = 24.28 times Market-to-book ratio = market value per Market-to-book share / book value per share share 87.65 / (2,556 / 190.9) = 6.55 times 19 19 Deriving the DuPont Identity ROE = NI / TE Multiply by 1 (TA/TA) and then rearrange ROE = (NI / TE) (TA / TA) ROE = (NI / TA) (TA / TE) = ROA * EM Multiply by 1 (Sales/Sales) again and then Multiply rearrange rearrange ROE = (NI / TA) (TA / TE) (Sales / Sales) ROE = (NI / Sales) (Sales / TA) (TA / TE) ROE = PM * TAT * EM 20 20 Using the DuPont Identity ROE = PM * TAT * EM Profit margin is a measure of the firm’s Profit operating efficiency – how well it controls costs costs Total asset turnover is a measure of the firm’s Total asset use efficiency – how well does it manage its assets manage Equity multiplier is a measure of the firm’s Equity financial leverage financial 21 21 Expanded DuPont Analysis – Expanded Aeropostale Data Aeropostale Bal. Sheet (1/28/06) Data Bal. (millions, $U.S.) (millions, Cash = 225.27 Inventory = 91.91 Other CA = 22.16 Fixed Assets = 164.62 Total Equity = 284.71 Computations TA = 503.96 TAT = 2.39 EM = 1.77 2006 Inc. Statement Data 2006 (millions, $U.S.) (millions, Sales = 1,204.35 COGS = 841.87 SG&A = 227.04 Interest = (3.67) Taxes = 55.15 Computations NI = 83.96 PM = 6.97% ROA = 16.66% ROE = 29.49% 22 22 Aeropostale Extended DuPont Aeropostale Chart Chart ROE = 29.49% ROA = 16.66% Total Costs = - 1,120.39 EM = 1.77 x PM = 6.97% ÷ NI = 83.96 x + Sales = 1,204.35 Sales = 1,204.35 TAT = 2.39 Sales...
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