2016 2015 2014 2013 2012 Inventory Turnover 4.20 4.10 4.10 3.90 3.70 Debt Ratio
ID: 2568267 • Letter: 2
Question
2016
2015
2014
2013
2012
Inventory Turnover
4.20
4.10
4.10
3.90
3.70
Debt Ratio
0.48
0.50
0.49
0.47
0.47
Times Interest Earned
4.60
4.80
5.90
5.70
6.00
Sales as a % of 1996 Sales
1.46
1.23
1.12
1.06
1.00
Net Income as a % of 1996 Income
1.31
1.20
1.10
1.06
1.00
Gross Profit Margin on sales
38.5%
38.8%
38.9%
40.0%
39.7%
Operating Expenses to Net Sales
11.4%
11.3%
11.5%
11.4%
11.7%
Net Profit Margin
7.6%
8.6%
8.9%
9.4%
9.3%
Return on Total Operating Assets
9.4%
9.6%
9.6%
10.0%
10.7%
Required:
a.
The net profit margin has declined substantially. Discuss at least two specific possible causes of this situation for this firm (based on the above data only). (2 points)
b.
Has the firm utilized its total operating assets effectively for each of the five years? Show with the DuPont analysis. Discuss the ability of the firm to generate sales based on total operating assets. (7 points)
2016
2015
2014
2013
2012
Inventory Turnover
4.20
4.10
4.10
3.90
3.70
Debt Ratio
0.48
0.50
0.49
0.47
0.47
Times Interest Earned
4.60
4.80
5.90
5.70
6.00
Sales as a % of 1996 Sales
1.46
1.23
1.12
1.06
1.00
Net Income as a % of 1996 Income
1.31
1.20
1.10
1.06
1.00
Gross Profit Margin on sales
38.5%
38.8%
38.9%
40.0%
39.7%
Operating Expenses to Net Sales
11.4%
11.3%
11.5%
11.4%
11.7%
Net Profit Margin
7.6%
8.6%
8.9%
9.4%
9.3%
Return on Total Operating Assets
9.4%
9.6%
9.6%
10.0%
10.7%
Explanation / Answer
b.
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