ROE ( Return on equity ) using DuPont Identity Introduction: ROE under Du Pont Identity is determined by multiplying the three main elements. The three elements under Du Pont Identity are net profit margin, asset turnover and equity multiplier.

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Answer 1

Question

Chapter 2, Problem 41P

a)

Summary Introduction

To determine: ROE (Return on equity) using DuPont Identity

Introduction: ROE under Du Pont Identity is determined by multiplying the three main elements. The three elements under Du Pont Identity are net profit margin, asset turnover and equity multiplier.

b)

Summary Introduction

To determine: The new asset turnover required to increase its ROE when the manager wants to increase its ROE by 1%.

Introduction:

Asset turnover ratio indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

c)

Summary Introduction

To determine: The new asset turnover required to increase its ROE when the net profit margin falls by 1%.

Introduction:

Asset turnover indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

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Find online the annual 10-K report for Costco Wholesale Corporation (COST) for fiscal year 2015 (filed in October 2015). a. Compute Costco's net profit margin, total asset turnover, and equity multiplier. b. Verify the DuPont Identity for Costco's ROE. c. If Costco's managers wanted to increase its ROE by 1 percentage point, how much higher would their asset turnover need to be? a. Compute Costco's net profit margin, total asset turnover, and equity multiplier. The net profit margin is %. (Round to two decimal places.) The total asset turnover is (Round to two decimal places.) The equity multiplier is (Round to two decimal places.) b. Verify the DuPont Identity forCostco's ROE. The ROE is %. (Round to two decimal places.) c. If Costco's managers wanted to increase its ROE by 1 percentage point, how much higher would their asset turnover need to be? The total assets turnover should be (Round to two decimal places.) The total asset turnover should be % (Round to two decimal places and…

41. For fiscal year 2015, Costco Wholesale Corporation (COST) had a net profit margin of 2.05%, asset turnover of 3.48, and a book equity multiplier of 3.15. a. Use this data to compute Costco's ROE using the DuPont Identity. b. If Costco's managers wanted to increase its ROE by one percentage point, how much higher would their asset turnover need to be? c. If Costco's net profit margin fell by one percentage point, by how much would their asset turnover need to increase to maintain their ROE?

Below are the ratio results for Abcom for the year 2022. Performance Operating margin -18.66% Asset turnover 0.16 Return on Capital Employed -7.64% Working capital Inventory days 88.88 days Debtor days 46.18 days Trade creditor days 68.11 days Liquidity Current ratio 0.30 Acid test 0.25 Solvency Interest cover -2.56 Shareholder's view Return on equity 7.16% Required; Analyse and interpret the meaning of these results.

Answer 2

Question

Chapter 2, Problem 41P

a)

Summary Introduction

To determine: ROE (Return on equity) using DuPont Identity

Introduction: ROE under Du Pont Identity is determined by multiplying the three main elements. The three elements under Du Pont Identity are net profit margin, asset turnover and equity multiplier.

b)

Summary Introduction

To determine: The new asset turnover required to increase its ROE when the manager wants to increase its ROE by 1%.

Introduction:

Asset turnover ratio indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

c)

Summary Introduction

To determine: The new asset turnover required to increase its ROE when the net profit margin falls by 1%.

Introduction:

Asset turnover indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

Expert Solution & Answer

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Answer 3

Question

Chapter 2, Problem 41P

a)

Summary Introduction

To determine: ROE (Return on equity) using DuPont Identity

Introduction: ROE under Du Pont Identity is determined by multiplying the three main elements. The three elements under Du Pont Identity are net profit margin, asset turnover and equity multiplier.

b)

Summary Introduction

To determine: The new asset turnover required to increase its ROE when the manager wants to increase its ROE by 1%.

Introduction:

Asset turnover ratio indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

c)

Summary Introduction

To determine: The new asset turnover required to increase its ROE when the net profit margin falls by 1%.

Introduction:

Asset turnover indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

Expert Solution & Answer

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Answer 4

Question

Chapter 2, Problem 41P

a)

Summary Introduction

To determine: ROE (Return on equity) using DuPont Identity

Introduction: ROE under Du Pont Identity is determined by multiplying the three main elements. The three elements under Du Pont Identity are net profit margin, asset turnover and equity multiplier.

b)

Summary Introduction

To determine: The new asset turnover required to increase its ROE when the manager wants to increase its ROE by 1%.

Introduction:

Asset turnover ratio indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

c)

Summary Introduction

To determine: The new asset turnover required to increase its ROE when the net profit margin falls by 1%.

Introduction:

Asset turnover indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

Expert Solution & Answer

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Answer 5

Chapter 2, Problem 41P

a)

Summary Introduction

To determine: ROE (Return on equity) using DuPont Identity

Introduction: ROE under Du Pont Identity is determined by multiplying the three main elements. The three elements under Du Pont Identity are net profit margin, asset turnover and equity multiplier.

b)

Summary Introduction

To determine: The new asset turnover required to increase its ROE when the manager wants to increase its ROE by 1%.

Introduction:

Asset turnover ratio indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

c)

Summary Introduction

To determine: The new asset turnover required to increase its ROE when the net profit margin falls by 1%.

Introduction:

Asset turnover indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

Answer 6

Chapter 2, Problem 41P

a)

Summary Introduction

To determine: ROE (Return on equity) using DuPont Identity

Introduction: ROE under Du Pont Identity is determined by multiplying the three main elements. The three elements under Du Pont Identity are net profit margin, asset turnover and equity multiplier.

Answer 7

Chapter 2, Problem 41P

a)

Summary Introduction

To determine: ROE (Return on equity) using DuPont Identity

Introduction: ROE under Du Pont Identity is determined by multiplying the three main elements. The three elements under Du Pont Identity are net profit margin, asset turnover and equity multiplier.

Answer 8

b)

Summary Introduction

To determine: The new asset turnover required to increase its ROE when the manager wants to increase its ROE by 1%.

Introduction:

Asset turnover ratio indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

Answer 9

b)

Summary Introduction

To determine: The new asset turnover required to increase its ROE when the manager wants to increase its ROE by 1%.

Introduction:

Asset turnover ratio indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

Answer 10

c)

Summary Introduction

To determine: The new asset turnover required to increase its ROE when the net profit margin falls by 1%.

Introduction:

Asset turnover indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

Answer 11

c)

Summary Introduction

To determine: The new asset turnover required to increase its ROE when the net profit margin falls by 1%.

Introduction:

Asset turnover indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 2.1 - Prob. 1CC Ch. 2.1 - Prob. 2CC Ch. 2.2 - Prob. 1CC Ch. 2.2 - Prob. 2CC Ch. 2.2 - Prob. 3CC Ch. 2.3 - What it is the difference between a firms gross...Ch. 2.3 - What is the diluted earnings per share?Ch. 2.4 - Prob. 1CC Ch. 2.4 - Prob. 2CC Ch. 2.5 - Prob. 1CC

ROE ( Return on equity ) using DuPont Identity Introduction: ROE under Du Pont Identity is determined by multiplying the three main elements. The three elements under Du Pont Identity are net profit margin, asset turnover and equity multiplier.

Solution Summary: The author explains that ROE under DuPont Identity is determined by multiplying the three main elements: net profit margin, asset turnover, and equity multiplier.

Concept explainers

Videos

To determine: ROE (Return on equity) using DuPont Identity

Introduction: ROE under Du Pont Identity is determined by multiplying the three main elements. The three elements under Du Pont Identity are net profit margin, asset turnover and equity multiplier.

To determine: The new asset turnover required to increase its ROE when the net profit margin falls by 1%.

Introduction:

Asset turnover indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

Want to see the full answer?

Chapter 2 Solutions

ROE ( Return on equity ) using DuPont Identity Introduction: ROE under Du Pont Identity is determined by multiplying the three main elements. The three elements under Du Pont Identity are net profit margin, asset turnover and equity multiplier.

Solution Summary: The author explains that ROE under DuPont Identity is determined by multiplying the three main elements: net profit margin, asset turnover, and equity multiplier.

Concept explainers

Videos

To determine: ROE (Return on equity) using DuPont Identity Introduction: ROE under Du Pont Identity is determined by multiplying the three main elements. The three elements under Du Pont Identity are net profit margin, asset turnover and equity multiplier.

To determine: The new asset turnover required to increase its ROE when the net profit margin falls by 1%. Introduction: Asset turnover indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.

Want to see the full answer?

Chapter 2 Solutions

To determine: ROE (Return on equity) using DuPont Identity

Introduction: ROE under Du Pont Identity is determined by multiplying the three main elements. The three elements under Du Pont Identity are net profit margin, asset turnover and equity multiplier.

To determine: The new asset turnover required to increase its ROE when the net profit margin falls by 1%.

Introduction:

Asset turnover indicates the efficiency of the assets of the company which generates revenue or sales. High ratio of asset turnover is favored than the lower ratio.