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Entrepreneurial Finance

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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Canis Major Veterinary Supplies Inc. DuPont Analysis

Ratios	Value	Correct/Incorrect	Ratios	Value	Correct/Incorrect
Profitability ratios			Asset management ratio
Gross profit margin (%)	50.00		Total assets turnover	2.00
Operating profit margin (%)	22.36
Net profit margin (%)	33.54		Financial ratios
Return on equity (%)	112.02		Equity multiplier	1.67

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Using the Du Pont Identity Method, calculate return on equity given the following information. Profit margin 16%; total asset turnover 0.85; equity multiplier 1.5. OA. OB. O C. O D. OE 20.40% 21.40% 22.40% 23.40% 24.40%
DuPont Ratio General Mills Kelloggs Return on shareholders' equity (ROE) 0.402 0.247 Return on assets (ROA) 0.070 0.073 Leverage 5.783 3.362 Return on sales (ROS) (aka Profit Margin 0.091 0.129 Asset turnover 0.765 0.569 Based on the ratio analysis, which statements are true? Indicate ALL the answers that are correct. Group of answer choices Kelloggs use their assets more effectively to generate sales. Kelloggs has better overall performance. General Mills uses more liability financing relative to equity financing. General Mills does a better job controlling their expenses relative to sales. Kelloggs uses their assets more effectively to generate net income.
General Mills Kelloggs Return on shareholders' equity (ROE) 0.402 0.247 Return on assets (ROA) 0.070 0.073 Leverage 5.783 3.362 Return on sales (ROS) (aka Profit Margin 0.091 0.129 Asset turnover 0.765 0.569 Based on the ratio analysis, which statements are true? Indicate ALL the answers that are correct. Group of answer choices Kelloggs use their assets more effectively to generate sales. Kelloggs has better overall performance. General Mills uses more liability financing relative to equity financing. General Mills does a better job controlling their expenses relative to sales. Kelloggs uses their assets more effectively to generate net income.
RATIO CALCULATIONS Assume the following relationships for the Brauer Corp.:Sales/Total assets 1.5xReturn on assets (ROA) 3.0%Return on equity (ROE) 5.0%Calculate Brauer’s profit margin and debt-to-capital ratio assuming the firm uses only debt and common equity, so total assets equal total invested capital.
Ratio Industry Ratios GnG Ratios 1. Current Ratio 5.3 2. Acid Test Ratio 5.1 3. Gross Profit Ratio 30% 4. Net Income Margin 7.5% 5. Receivable Turnover Ratio 9 6. Return on Asset Ratio 12% 7. Debt to Asset Ratio 1:4 Interpretation and verbal analysis compared to industry ratios: 1. Liquidity 2. Profitability 3. Solvency Computations:
Assume the following relationships for the Caulder Corp.:Sales/Total assets 1.33Return on assets (ROA) 4.0%Return on equity (ROE) 8.0%Calculate Caulder’s profit margin and debt-to-capital ratio assuming the firm uses onlydebt and common equity, so total assets equal total invested capital.
Assume the following relationships for the Caulder Corp.: Sales/Total assets 1.5× Return on assets (ROA) 8.0% Return on equity (ROE) 12.0% Calculate Caulder's profit margin and debt-to-capital ratio assuming the firm uses only debt and common equity, so total assets equal total invested capital. Do not round intermediate calculations. Round your answers to two decimal places. Profit margin: % Debt-to-capital ratio: %
Assume you are given the following relationships for the Warner Corporation: Sales / Total assets 1.2× Return on assets (ROA) 3.95% Return on equity (ROE) 7.70%Calculate Warner’s profit margin. a. 4.74% b. 9.24% c. 3.29% d. 1.95% e. 6.42%
ssume the following relationships for the Caulder Corp.: Sales/Total assets 1.2\times Return on assets (ROA ) 5.0% Return on equity (ROE) 15.0% Calculate Caulder's profit margin and debt-to-capital ratio assuming the firm uses only debt and common equity, so total assets equal total invested capital. Do not round intermediate calculations. Round your answers to two decimal places.
DuPont system of analysis Use the following financial information for AT&T and Verizon to conduct a DuPont system of analysis for each company. AT&T Sales $164,000 Earnings available for common stockholders 13,333 Total assets 403,721 Stockholders' equity 124,210 a. Which company has the higher net profit margin? Higher asset turnover? b. Which company has the higher ROA? The higher ROE? c. Which company has the higher financial leverage multiplier? a. Net profit margin (Round to three decimal places.) AT&T Net profit margin Verizon C Verizon $131,868 13.708 244,180 24,032
Ratio Industry GnG Ratios Ratios 1. Net Income Margin 7.5% 18.2% 2. Receivable Turnover Ratio 9. 14.41 3. Return on Asset Ratio 12% 9.29% 4. Debt to Asset Ratio 1:4 1:1 Interpretation and verbal analysis compared to industry ratios: 1. Liquidity 2. Profitability 3. Solvency
using the table find the folloing for the four firms: Enterprise value to EBITDA Ratio Price-Earnings multiole PEG raio Cpmpany Market Value (OMR million) Net Income (OMR million) Earnings Growth Market Value of Equity (OMR million) Market Value of Debt (OMR million) Cash (OMR million) EBITDA (OMR million) Happy 117.95 22.5 4% 53.07 64.87 41.25 43.85 Smart 112.35 20.25 4.5% 59.53 52. 79 45 44.88 Kind 116.26 21 4.65% 69.76 46.5 63.95 28.20 Cheerful 120 24 5% 42 78 62.4 44.32

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