Bills Paper

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1-310-919-0950 Hi rlaughter1981 StudyMode.com Essays Book Notes AP Notes More Essays » Chemistry Dupont Case By tweaklefairy, Feb 2009 | 9 Pages (2,231 Words) | 1641 Views | 12345 Report | This is a Premium essay for members like you Executive Summary DuPont has been known for its low reliance on borrowings. In the 1970’s, the company had to assume a substantial portion of debt of Conoco, a newly acquired company. In 1983, the managers have to decide about the future optimal target debt ratio. Should the company continue to keep about 40% of its assets financed via debt or should it strive to lower its borrowings to 25%? We defined several criteria to determine our choice – return, risks and other quantitative…show more content…
Prior to 1980s, DuPont has been well known for its policy of extreme financial conservatism. The company’s low debt ratio was feasible in part because of its success in its product market. In fact, this made them one of the few companies with an AAA rating that allowed it to maximize financial flexibility. We can divide the previous period by the time with conservative debt policy (1965-1979) and that with a more liberal debt policy (1980). Year Sales* EBIT* Capital Expenditure* 1965 $ 2,999 $ 767 $ 327 1966 $ 3,159 $ 727 $ 531 1967 $ 3,079 $ 574 $ 454 1968 $ 3,455 $ 764 $ 332 1969 $ 3,632 $ 709 $ 391 1970 $ 3,618 $ 590 $ 471 1971 $ 3,848 $ 644 $ 454 1972 $ 4,366 $ 768 $ 522 1973 $ 5,964 $ 1,100 $ 727 1974 $ 6,910 $ 733 $ 1,008 1975 $ 7,222 $ 574 $ 1,036 1976 $ 8,361 $ 961 $ 876 1977 $ 9,435 $ 1,141 $ 704 1978 $ 10,584 $ 1,470 $ 714 1979 $ 12,572 $ 1,646 $ 864 Growth Rate 11.15% 9.03% 9.90% * In thousands dollars ($ ‘000) From above, we see that sales grew at an average of 11.15% and EBIT at 9.03%. Coinciding this, is an average capital expenditure of 9.90%. Let us now look at the second period. Year Sales* EBIT* Capital Expenditure* 1980 $ 13,652 $ 1,209 $ 1,297 1981 $ 22,810 $ 2,631 $ 2,389 1982 $ 33,331 $ 3,545 $ 3,195 Growth Rate 56.60% 76.18% 58.97% We can see a soaring increase on the growth of sales and EBIT for this period,

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