Question

Input Data 2018 2017 Ratios 2018 2017 % Variance Revenues $500,343 $485,873 1.Profitability Ratios Cost of Goods Sold 373,396 361,256 a.Gross Margin Percentage = Gross Profit ÷ Revenues 25.37% 25.65% -1.08% Gross Profit 126,947 124,617 b.EBIT Margin Percentage = EBIT ÷ Revenues 4.08% 4.69% -12.82% EBIT 20,437 22,764 Interest Expense 1,978 2,044 Resource Management Ratios: Net Income 10,523 14,293 "a. Age of Inventory = Inventories ÷ Average Daily Cost of Goods Sold" 43 43 -1.59% Accounts Receivable 5,614 5,835 "b. Age of Accounts Receivable = Accounts Receivable ÷ Average Daily Credit Sales" 83 88 -6.59% Inventories 43,783 43,046 "c. Age of Accounts Payable = Accounts Payable ÷ Average Daily Purchases" 5 6 -7.46% Current Assets 59,664 57,689 Total Assets 204,522 198,825 "3. Liquidity Ratio:" Accounts Payable 46,092 41,433 "a. Current Ratio = Current Assets ÷ Current Liabilities" 0.76 0.86 -11.85% Current Liabilities 78,521 66,928 Total Liabilities 123,700 118,290 "4. Leverage Ratios" Total Stockholders' Equity 80,822 80,535 "a. Debt-to-Assets Ratio = Total Liabilities ÷ Total Assets" 0.60 0.59 1.66% "b. Debt-to-Equity Ratio = Total Liabilities ÷ Total Stockholders' Equity" 1.53 1.47 4.20% Credit Sales 24,788.05 24,065.85 "c. Interest Coverage = EBIT ÷ Interest Expense" 10.33 11.14 -7.23% Beginning Inventory 43,046.00 44,469.00 Ending Inventory 43,783.00 43,046.00 DuPont Ratio Purchases 374,133 359,833 Profit Margin = Net Income ÷ Revenues 2.10% 2.94% -28.51% Asset Turnover = Revenues ÷ Assets 2.45 2.44 0.11% Financial Leverage = Assets ÷ Equity 2.53 2.47 2.50% ROE = Profit Margin x Asset Turnover x Financial Leverage 13.02% 17.75% -26.64% with the given information, what are the dupont and leverage ratios? please provide calculations

Answer 1

Answer:

1. Dupont ratio

Dupont ratio = ROE = Profit Margin x Asset Turnover x Financial Leverage

Calculations of Profit Margin, Asset Turnover and Financial Leverage are as follows:

2018 Dupont ratio = 2.103% * 2.446 * 2.531 = 13.02%

2017 Dupont ratio = 2.942% * 2.444 * 2.469 = 17.75%

2. Leverage ratios:

a. Debt-to-Assets Ratio = Total Liabilities ÷ Total Assets

2018 Debt-to-Assets Ratio = 123700 / 204522 = 0.60

2017 Debt-to-Assets Ratio = 118290 / 198825 = 0.59

b. Debt-to-Equity Ratio = Total Liabilities ÷ Total Stockholders' Equity

2018 Debt-to-Equity Ratio = 123700 / 80822 =1.53

2017 Debt-to-Equity Ratio = 118290 / 80535 = 1.47

c. Interest Coverage = EBIT ÷ Interest Expense

2018 Interest Coverage = 20437 / 1978 =10.33

2017 Interest Coverage ​​​​​​​= 22764 / 2044 = 11.14

d. Financial Leverage = Assets ÷ Equity

2018 Financial Leverage = 204522 / 80822 = 2.53

2017 Financial Leverage =198825 / 80535 = 2.47