Calculate the following based on the DuPont Model: Year One Cash $16,080 Account

Question

Calculate the following based on the DuPont Model:
Year One
Cash $16,080
Accounts Receivable $9,500
Prepaid $3,150
Supplies $675
Equipment $25,200
Accumulated depreciation - equipment $8,150

Year Two
Cash $20,000
Accounts receivable $15,000
Prepaid $1,175
Supplies $2,675
Equipment $89,057
Accumulated depreciation - equipment $36,800

Addl Year Two Data
Equity equals $82,600
Net Sales $325,000
Net Income is $56,824

Also note that sales revenue and net sales are the same, and leave decimal to 2 places.

Explanation / Answer

Answer:

Dupont is the other way to calculate ROE

ROE = Profit Margin (Profit/Sales) * Total Asset Turnover (Sales/Assets) * Equity Multiplier (Assets/Equity)

= (56824/325000)*(325000/91107)*(91107/82600)

= 0.174*3.56*1.102

= 0.6879 or 68.79%

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