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The DuPont equation shows the relationships among asset management, debt management, and -Select-liquiditymarketprofitabilityCorrect 1 of Item...

The DuPont equation shows the relationships among asset management, debt management, and -Select-liquiditymarketprofitabilityCorrect 1 of Item 1 ratios. Management can use the DuPont equation to analyze ways of improving the firm's performance. Its equation is:

Ratio analysis is important to understand and interpret financial statements; however, sound financial analysis involves more than just calculating and interpreting numbers. -Select-QuantitativeQualitativeForeignCorrect 2 of Item 1 factors also need to be considered.

Quantitative Problem: Rosnan Industries' 2019 and 2018 balance sheets and income statements are shown below.

Balance Sheets:
2019 2018
Cash and equivalents $ 60 $ 45
Accounts receivable 275 300
Inventories 375 350
      Total current assets $ 710 $ 695
Net plant and equipment 2,000 1,490
Total assets $ 2,710 $ 2,185
Accounts payable $ 150 $ 85
Accruals 75 50
Notes payable 110 135
      Total current liabilities $ 335 $ 270
Long-term debt 450 290
Common stock 1,225 1,225
Retained earnings 700 400
Total liabilities and equity $ 2,710 $ 2,185
Income Statements:
2019 2018
Sales $ 1,885 $ 1,425
Operating costs excluding depreciation 1,250 1,000
EBITDA $ 635 $ 425
Depreciation and amortization 100 75
EBIT $ 535 $ 350
Interest 63 46
EBT $ 472 $ 304
Taxes (25%) 118 76
Net income $ 354 $ 228
Dividends paid $ 54 $ 48
Addition to retained earnings $ 300 $ 180
Shares outstanding 100 100
Price $ 25.00 $ 22.50
WACC 10.00 %

What is the firm's 2019 current ratio? Round your answer to two decimal places.

The 2019 current ratio indicates that Rosnan has -Select-insufficientsufficientCorrect 1 of Item 3 current assets to meet its current obligations as they come due.

What is the firm's 2019 total assets turnover ratio? Round your answer to four decimal places.

Given the 2019 current and total assets turnover ratios calculated above, if Rosnan's 2019 quick ratio is 1.0 then an analyst might conclude that Rosnan's fixed assets are managed -Select-efficientlyinefficientlyCorrect 1 of Item 4.

What is the firm's 2019 debt-to-capital ratio? Round your answer to two decimal places.

%

If the industry average debt-to-capital ratio is 30%, then Rosnan's creditors have a -Select-smallerbiggerCorrect 1 of Item 5 cushion than indicated by the industry average.

What is the firm's 2019 profit margin? Round your answer to two decimal places.

%

If the industry average profit margin is 12%, then Rosnan's lower than average debt-to-capital ratio might be one reason for its high profit margin. -Select-TrueFalseCorrect 1 of Item 6

What is the firm's 2019 price/earnings ratio? Round your answer to two decimal places.

Using the DuPont equation, what is the firm's 2019 ROE? Round your answer to two decimal places.

%

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Analysis of Financial Statements: Tying the Ratios Together The DuPont equation shows the relationships among asset management, debt management, and -Select-liquiditymarketprofitabilityCorrect 1 of Item 1  ratios. Management can use the DuPont equation to analyze ways of improving the firm's performance. Ratio analysis is important to understand and interpret financial statements; however, sound financial analysis involves more than just calculating and interpreting numbers. -Select-QuantitativeQualitativeForeignCorrect 2 of Item 1   factors also need to be considered. Quantitative Problem: Rosnan Industries' 2018 and 2017 balance...
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