3 DuPont Analysis Playing the Numbers Game Numbers! I need to see numbers!\" exc
ID: 2819155 • Letter: 3
Question
3 DuPont Analysis Playing the Numbers Game Numbers! I need to see numbers!" exclaimed Marcus in response to com- ments made by the assistant vice-president of Finance, Jeff Smith. Marcus Lenovo, president and chief executive officer of Duralex Inc., had been instrumental in significantly increasing the company's size during his first five years in office. He spearheaded some successful marketing campaigns and revamped the production facilities by adopting the latest technology in injection molding. He also implemented various cost-cutting measures and introduced performance plans to boost efficiency. Foremen and supervisors were offered stock option incentives, and bonuses were tied to earnings per share (EPS) growth Duralex Inc., a medium-sized plastic molding company, was founded in 2008 and was located in Midland, Michigan. The company supplied molded plastic products to various processing industries as well as end-users. It enjoyed a fairly diversified base of customers, ranging from automobile and home products manufacturers to the federal government. After an initial period of sluggish growth, the firm's revenues and profits had almost quadrupled. Most of the increase had been achieved under Lenovo's lead- ership. The plastics business offered potential for high profit margins, and as a result it attracted many competitors. Despite the fierce competition, Duralex's stock, which traded in the over-the-counter market, had tripled in value over the past five years, making the shareholders very happyExplanation / Answer
Cost as a percentage of sales for Duralex Inc. in 2015 is 74.81 compared to 62.75% n 2014. Also special charges are 65.8 M which were mostly used for cost effective measures.
Hence the profit become negative for durolex.
For Apex molding, the cost as a percentage of sales is 66.8% and profit as a percentage of sales is 5.9%.
Their net income increased due to increase in sales.
How serious will depend upon the measures he has taken to reduce cost, which doesnot seem to be seen in cost of goods.
He has to review the cost effective measures he has taken as they dont even have funds to pay back interest expenses.
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