CORPORATE FINANCE--CONNECT ACCESS CARD
12th Edition
ISBN: 9781264807475
Author: Ross
Publisher: MCG CUSTOM
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DuPont system of analysis Use the following financial information for AT&T and Verizon to
conduct a DuPont system of analysis for each company.
Sales
Earnings available for common stockholders
Total assets
Stockholders' equity
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
AT&T
$164,000
13,333
403,921
201,934
Verizon
Verizon
$126,280
13,608
244,280
24,232
If Rooters, Inc., has an equity multiplier of 1.90, total asset turnover of 1.20, and a profit margin of 8 percent, what is its ROE?
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%
Chapter 3 Solutions
CORPORATE FINANCE--CONNECT ACCESS CARD
Ch. 3 - Financial Ratio Analysis A financial ratio by...Ch. 3 - Industry-Specific Ratios So-called same-store...Ch. 3 - Sales Forecast Why do you think most long-term...Ch. 3 - Sustainable Growth In the chapter, we used...Ch. 3 - EFN and Growth Rate Broslofski Co. maintains a...Ch. 3 - Common-Size Financials One tool of financial...Ch. 3 - Asset Utilization and EFN One of the implicit...Ch. 3 - Comparing ROE and ROA Both ROA and ROE measure...Ch. 3 - Ratio Analysis Consider the ratio EBITD/Assets....Ch. 3 - Return on Investment A ratio that is becoming more...
Ch. 3 - Use the following information to answer the next...Ch. 3 - Prob. 12CQCh. 3 - Use the following information to answer the next...Ch. 3 - Use the following information to answer the next...Ch. 3 - Use the following information to answer the next...Ch. 3 - DuPont Identity If Muenster, Inc., has an equity...Ch. 3 - Equity Multiplier and Return on Equity Synovec...Ch. 3 - Prob. 3QAPCh. 3 - EFN The most recent financial statements for...Ch. 3 - Prob. 5QAPCh. 3 - Sustainable Growth If the Moran Corp. has an ROE...Ch. 3 - Prob. 7QAPCh. 3 - Prob. 8QAPCh. 3 - Prob. 9QAPCh. 3 - Prob. 10QAPCh. 3 - Prob. 11QAPCh. 3 - Prob. 12QAPCh. 3 - External Funds Needed The Optical Scam Company has...Ch. 3 - Days' Sales in Receivables A company has net...Ch. 3 - Prob. 15QAPCh. 3 - Prob. 16QAPCh. 3 - Prob. 17QAPCh. 3 - Prob. 19QAPCh. 3 - Prob. 20QAPCh. 3 - Calculating EFN The most recent financial...Ch. 3 - Prob. 22QAPCh. 3 - Prob. 23QAPCh. 3 - Prob. 26QAPCh. 3 - Prob. 27QAPCh. 3 - Prob. 28QAPCh. 3 - Prob. 29QAPCh. 3 - Prob. 30QAPCh. 3 - Calculate all of the ratios listed in the industry...Ch. 3 - Prob. 2MCCh. 3 - Prob. 3MCCh. 3 - Prob. 4MCCh. 3 - Prob. 5MC
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- If Roten Rooters, Inc., has an equity multiplier of 1.32, total asset turnover of 1.32, and a profit margin of 6.50 percent. What is its ROE? Multiple Choice -2.75% 10.19% 11.33% 12.46% 10.87%arrow_forward1. The Wilson Corporation has the following relationships:Sales/Total assets 2.0Return on assets (ROA) 4.0%Return on equity (ROE) 6.0%What is Wilson’s profit margin and debt ratio?arrow_forwardIf we know that a firm has a net profit margin of 4.5 % total asset turnover of 0.65, and a financial leverage multiplier of 1.47, what is its ROE? What is the advantage to using the DuPont system to calculate ROE over the direct calculation of earnings available for common stockholders divided by common stock equity?arrow_forward
- 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.arrow_forwardAssume 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.arrow_forwardDefine each of the following terms: Liquidity ratios: current ratio; quick, or acid test, ratio Asset management ratios: inventory turnover ratio; days sales outstanding (DSO); fixed assets turnover ratio; total assets turnover ratio Financial leverage ratios: debt ratio; times-interest-earned (TIE) ratio; EBITDA coverage ratio Profitability ratios: profit margin on sales; basic earning power (BEP) ratio; return on total assets (ROA); return on common equity (ROE) Market value ratios: price/earnings (P/E) ratio; price/cash flow ratio; market/book (M/B) ratio; book value per share Trend analysis; comparative ratio analysis; benchmarking DuPont equation; window dressing; seasonal effects on ratiosarrow_forward
- You have access to the following information and want to calculate the debt-to-equity ratio for the firm. Return on Equity: 23.87% Profit Margin: 13.81% Total Asset Turnover: 0.65 Answer as a DECIMAL using two decimal places.arrow_forwardIf Roten Rooters, Inc., has an equity multiplier of 1.27, total asset turnover of 2.10, and a profit margin of 6.1 percent, what is its ROE? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)arrow_forwardAssume 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%arrow_forward
- DuPont Analysis If Epic, Inc. has an ROE = 18%, equity multiplier = 4.7, a profit margin of 11.3%, what is the total asset turnover ratio? (Round your answer to 4 decimal places.)arrow_forwardDefine profitability raitos return on assets and return on equity. According to the following metrics: ROA Return on Assets: 14%; ROE Return on Equity: 305%. What is the profitability the of example company? Why or why not is this company profitable?arrow_forwardYou calculate that a firm has a total asset turnover of 0.12 and a profit margin of 0.92. If the firm reports that its ROE for the same time period is equal to 0.26, what must be the firms debt-to-equity ratio? Answer as a decimal (not percentage) to two decimal places.arrow_forward
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