(PLEASE SHOW ALL WORK AND FORMULAS) (PLEASE SHOW ALL WORK AND FORMULAS) 28) For
ID: 2813182 • Letter: #
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(PLEASE SHOW ALL WORK AND FORMULAS)
(PLEASE SHOW ALL WORK AND FORMULAS)
28) For the following firms, find the return on equity using the three components of the DuPont identity: operating efficiency, as measured by the profit margin (net income/sales); asset management efficiency, as measured by asset turnover (sales/total assets); and financial leverage, as measured by the equity multiplier (total assets/total equity) Financial Information ($ in millions, 2013) Company PepsiCo Coca-Cola McDonald's $28,106 Sales $66,415 $46,854 Net Income Total Assets Liabilities $77,487 $90,055 $36,626 $6,740 $8,584 $5,856 $53,199 $56,882 $20,617 29) Which of the following is a correct interpretation of a total asset turnover of 3.0? a) For each S1 of sales generated by the firm it requires S3 in assets. b) For each S1 of assets owned by the firm it generates $3 in sales. c) For each S3 of sales, the firm makes S1 in net profit after taxes. d) The firm completely replenishes its available assets 3 times per year. 30) Which of the following is NOT a component of the Du Pont identity? a) Asset use efficiency b) Financial leverage c) Profitability d) All of the above are component of the Du Pont identityExplanation / Answer
Ans 28) Dupont equation for ROE = net income /sales * sales/total asset * total asset/total equities
Total Equities = Total asset - total liabilities
ROE for Pepsico = 6740/66415 * 66415/77487 * 77487/24288 = 27.75%
ROE for Coca cola = 8584/46854 * 46854/90055 * 90055/33173 = 25.88%
ROE for Macdonald's = 5856/28106 * 28106/36626 * 36626/16009 = 36.58%
Ans 29) total asset turnover = sales / total asset = 3
which means for each $1of asset owned by the firm it generate $3 in sales. Correct option is B
Ans 30) Correct option is D all are part of Du pont identity.
Ans 31) Inventory turnover for ABC = 8
inventory turnover for XYZ = 365/55 = 6.64
Since inventory turnover of ABC is greater it did better job. Correct option will be A.
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