Canis Major Veterinary Supplies Inc. DuPont Analysis Ratios Calculation Value Profitability ratios Numerator Denominator Gross profit margin (%) / = Operating profit margin (%) / = Net profit margin (%) / = Return on equity (%) / = Asset management ratio Total assets turnover / = Financial ratios Equity multiplier / = MADISON: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Xavier would have been very disappointed in me if I had showed him my original work. So, now let’s switch topics and identify general strategies that could be used to positively affect Canis Major’s ROE. YOU: OK, so given your knowledge of the component ratios used in the DuPont equation, which of the following strategies should improve the company’s ROE? Check all that apply. Increase the interest rate on its notes payable or long-term debt obligations because it will reduce the company’s net profit margin. Use more debt financing in its capital structure and increase the equity multiplier. Increase the firm’s bottom-line profitability for the same volume of sales, which will increase the company’s net profit margin. Use more equity financing in its capital structure, which will increase the equity multiplier.
Canis Major Veterinary Supplies Inc. DuPont Analysis Ratios Calculation Value Profitability ratios Numerator Denominator Gross profit margin (%) / = Operating profit margin (%) / = Net profit margin (%) / = Return on equity (%) / = Asset management ratio Total assets turnover / = Financial ratios Equity multiplier / = MADISON: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Xavier would have been very disappointed in me if I had showed him my original work. So, now let’s switch topics and identify general strategies that could be used to positively affect Canis Major’s ROE. YOU: OK, so given your knowledge of the component ratios used in the DuPont equation, which of the following strategies should improve the company’s ROE? Check all that apply. Increase the interest rate on its notes payable or long-term debt obligations because it will reduce the company’s net profit margin. Use more debt financing in its capital structure and increase the equity multiplier. Increase the firm’s bottom-line profitability for the same volume of sales, which will increase the company’s net profit margin. Use more equity financing in its capital structure, which will increase the equity multiplier.
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 10P
Related questions
Question
Canis Major Veterinary Supplies Inc. DuPont Analysis
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Ratios
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Calculation
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|
Value
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|---|---|---|---|---|---|
| Profitability ratios | Numerator | Denominator | |||
| Gross profit margin (%) |
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/ |
|
= |
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| Operating profit margin (%) |
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/ |
|
= |
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| Net profit margin (%) |
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/ |
|
= |
|
|
|
/ |
|
= |
|
|
| Asset management ratio | |||||
| Total assets turnover |
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/ |
|
= |
|
| Financial ratios | |||||
| Equity multiplier |
|
/ |
|
= |
|
MADISON: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Xavier would have been very disappointed in me if I had showed him my original work.
So, now let’s switch topics and identify general strategies that could be used to positively affect Canis Major’s ROE.
YOU: OK, so given your knowledge of the component ratios used in the DuPont equation, which of the following strategies should improve the company’s ROE?
Check all that apply.
Increase the interest rate on its notes payable or long-term debt obligations because it will reduce the company’s net profit margin.
Use more debt financing in its capital structure and increase the equity multiplier.
Increase the firm’s bottom-line profitability for the same volume of sales, which will increase the company’s net profit margin.
Use more equity financing in its capital structure, which will increase the equity multiplier.
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