Calculate the DuPont Model, given the following information: cash = $16,080; acc

Question

Calculate the DuPont Model, given the following information: cash = $16,080; accounts receivable = $9,500; prepaid = $3,150; supplies = $675; equipment = $25,200; accumulated depreciation - equipment = $8,150 for year one. Cash = $20, 000; accounts receivable = $15,000; prepaid = $1,175; supplies = $2,675; equipment = $89,057; accumulated depreciation - equipment = $36,800 for year 2. Additional year 2 data is as follows: equity equals $82,600; net sales = $325,000; net income of $56,824. Assume sales revenue and net sales are the same, leave as a decimal to two places.

Explanation / Answer

Year 1 Year 2 Cash $      16,080 $      20,000 Accounts Receivable $         9,500 $      15,000 Prepaid $         3,150 $         1,175 Supplies $            675 $         2,675 Equipment $      25,200 $      89,057 Accumulated depreciation - equipment $       (8,150) $     (36,800) Total Assets $      46,455 $      91,107 ROE = Profit margin x total assets turnover x equity multiplier Average assets = (46455+91107)/2 $      68,781 Profit margin = Profit / sales 0.17 Total assets turnover = Sales / average assets 4.73 Equity multiplier = Average Assets/ equity 0.83 ROE = 0.17 x 4.73 x .83 0.69

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