GB 112/212 MANAGERIAL ACC. W/ACCESS >C<
17th Edition
ISBN: 9781260218831
Author: Libby
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 13, Problem 13.4CP
To determine
Interpret the DuPont ratios that differentiate the given companies as a result of their business strategies.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Corporate decision makers and analysts often use a particular technique, called a DuPont analysis, to better understand the factors that drive a company’s financial performance, as reflected by its return on equity (ROE). By using the DuPont equation, which disaggregates the ROE into three components, analysts can see why a company’s ROE may have changed for better or worse and identify particular company strengths and weaknesses.
The DuPont Equation
A) A DuPont analysis is conducted using the DuPont equation, which helps to identify and analyze three important factors that drive a company’s ROE. According to the equation, which of the following factors directly affect a company’s ROE? Check all that apply.
Equity multiplier
Share price
Profit margin
Most investors and analysts in the financial community pay particular attention to a company’s ROE. The ROE can be calculated simply by dividing a firm’s net income by the firm’s shareholder’s equity, and…
17. The ultimate objective entering rapidly
growing or emerging markets is to increase
sales and profits.
True
False
19. IFRS for small and medium size entities is
an independent standard that prescribes
financial reporting guidance for big sized
entities.
True
False
20. bring convergence of national accounting
standards, and International Accounting
Standards and International Financial
Reporting Standards to high-quality solutions
is one of the objectives of IASB.
True
False
21. it might be less expensive to locate
production close to the source of supply
rather than to import the materials.
True
False
22. Functional currency is the secondary
currency in which the reporting entity
transacts business and generates and spends
cash.
True
False
A financial services company is considering investing in a new fintech startup that has developed a new technology platform for investment management. The company is concerned about the risks associated with the investment and wants to evaluate the potential return on investment. You have been hired as a consultant to help the company make an informed decision. Which of the following financial ratios would be most appropriate for the financial services company to evaluate the financial health and performance of the fintech startup?
Gross profit margin
Debt-to-equity ratio
Return on investment (ROI)
Price-to-earnings (P/E) ratio
Chapter 13 Solutions
GB 112/212 MANAGERIAL ACC. W/ACCESS >C<
Ch. 13 - Who are the primary users of financial statements?Ch. 13 - When considering an investment in stock, investors...Ch. 13 - How does product differentiation differ from cost...Ch. 13 - What are the two general methods for making...Ch. 13 - What are component percentages? Why are they...Ch. 13 - What is ratio analysis? Why is it useful?Ch. 13 - What do profitability ratios focus on? What is an...Ch. 13 - What do turnover ratios focus on? What is an...Ch. 13 - What do liquidity ratios focus on? What is an...Ch. 13 - What do solvency ratios focus on? What is an...
Ch. 13 - What do market ratios focus on? What is an example...Ch. 13 - Prob. 12QCh. 13 - Explain why rapid growth in total sales might not...Ch. 13 - A company has total assets of 500,000 and...Ch. 13 - Prob. 2MCQCh. 13 - Prob. 3MCQCh. 13 - Prob. 4MCQCh. 13 - Prob. 5MCQCh. 13 - Prob. 6MCQCh. 13 - Prob. 7MCQCh. 13 - Prob. 8MCQCh. 13 - Prob. 9MCQCh. 13 - Prob. 10MCQCh. 13 - Prob. 13.1MECh. 13 - Prob. 13.2MECh. 13 - Prob. 13.3MECh. 13 - Computing the Financial Leverage Percentage...Ch. 13 - Analyzing the Inventory Turnover Ratio A...Ch. 13 - Prob. 13.6MECh. 13 - Prob. 13.7MECh. 13 - Prob. 13.8MECh. 13 - Prob. 13.9MECh. 13 - Prob. 13.10MECh. 13 - Using Financial Information to Identify Companies...Ch. 13 - Prob. 13.2ECh. 13 - Prob. 13.3ECh. 13 - Prob. 13.4ECh. 13 - Prob. 13.5ECh. 13 - Prob. 13.6ECh. 13 - Prob. 13.7ECh. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Inferring Financial Information from Ratios E13-11...Ch. 13 - Prob. 13.12ECh. 13 - Prob. 13.13ECh. 13 - Prob. 13.1PCh. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Computing Comparative Financial Statements and...Ch. 13 - Analyzing Financial Statements Using Ratios Use...Ch. 13 - Prob. 13.8PCh. 13 - Prob. 13.9PCh. 13 - Prob. 13.1APCh. 13 - Prob. 13.2APCh. 13 - Calculating Profitability, Turnover, Liquidity,...Ch. 13 - Prob. 13.4APCh. 13 - Prob. 13.5APCh. 13 - Prob. 13.6APCh. 13 - Prob. 13.1CPCh. 13 - Prob. 13.2CPCh. 13 - Comparing Companies within an Industry Refer to...Ch. 13 - Prob. 13.4CPCh. 13 - Inferring Information from the DuPont Model Ratios...Ch. 13 - Prob. 13.6CP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Analysis on the Role of Financial Management Milton Friedman has once popularly said "The social responsibility of business is to increase its profits; here is one and only one social responsibility of business to use its resources and engage in activities designed to increase its profits so long as it stays in the rules of the game, which is to say, engages in open and free competition, without deception or fraud." Do you agree or disagree with Friedman's arguments? Please provide your thoughts by considering the goals of Financial management.arrow_forwardThe CEO and his top managers have asked themselves two important questions: a. do customers value what the company is providing; and b. can the company make money doing that? This group is developing a ________. A. business model B. BCG matrix C. competitive advantage D. strategyarrow_forwardPls help... Your corporation is presenting its financial results for the year to the board of directors. You have created a model of premium service that have increased profit margins. However, the board members are concerned that this has been achieved by adding more staff instead of better use of technology compared to your competitors. What ratio should the board members be looking for to see if their apprehensions are justified? Group of answer choices SG&A/Sales ROIC/Sales Return on sales PPE/Salesarrow_forward
- 1. Ratio analysis A company reports accounting data in its financial statements. This data is used for financial analyses that provide insights into a company's strengths, weaknesses, performance in specific areas, and trends in performance. These analyses are often used to compare a company's performance to that of its competitors or to its past or expected future performance. Such insight helps managers and analysts improve their decision making. Consider the following scenario: You work for a brokerage firm. Your boss asked you to analyze Blue Parrot Manufacturing's performance for the past three years and to write a report that includes a benchmarking of the company's performance. Which of the following components would be best for you to include in your financial statement analysis? A critique of the company's financial statements and a report of any misprints to be sent to the Securities and Exchange Commission A calculation of financial ratios and an evaluation of the…arrow_forwardCase Study: Financial Reporting in a Dynamic Business Environment Introduction: Financial reporting is a cornerstone of transparency and accountability in the corporate world. In today's dynamic business environment, organizations encounter various challenges and complexities as they strive to provide accurate and timely financial information. This case study explores the multifaceted nature of financial reporting, examining key factors that influence the process and the implications for stakeholders. Technological Advancements and Data Management: In the digital age, technological advancements have transformed the landscape of financial reporting. Companies now have access to sophisticated software and tools that streamline data collection, analysis, and presentation. While these advancements enhance efficiency, they also introduce challenges related to data security, integrity, and the need for skilled professionals to navigate complex systems. Globalization and Diverse Regulatory…arrow_forwardMost investors and analysts in the financial community pay particular attention to a company's ROE. The ROE can be calculated simply by dividing a firm's net income by the firm's shareholder's equity, and it can be subdivided into the key factors that drive the ROE. Investors and analysts focus on these drivers to develop a clearer picture of what is happening within a company. An analyst gathered the following data and calculated the various terms of the DuPont equation for three companies: Company A Company B Company C ROE 12.0% 15.5% 21.5% Profit Margin 57.3% 58.2% 58.0% X Total Assets Turnover X Equity Multiplier 9.8 10.2 10.3 2.14 2.61 3.60 Referring to these data, which of the following conclusions will be true about the companies' ROES? O The main driver of Company A's inferior ROE, as compared with that of Company B's and Company C's ROE, is its use of higher debt financing. O The main driver of Company C's superior ROE, as compared with that of Company A's and Company B's ROE,…arrow_forward
- ASSIGNMENT REVIEW QUEST IONS Direction: Answer comprehensively the following questions. 1. Why should corporate governance be in place? 2. In a large corporation, what are the two distinct groups that report to the chief financial officer? Which group is the focus of corporate finance? 3. Would our goal of maximizing the value of the equity shares be different if we were thinking about financial management in a foreign country? Why or why not?arrow_forwardWhy is comparison with industry averages helpful when analyzing financial statements? Question 9 options: a. Companies want to be average b. Serves as a base line for comparison with similar companies of larger/smaller size c. Management bonuses are based on averages d. Helpful in evaluating sales campaignsarrow_forwardCVP Analysis; Strategy; Uncertainty Computer Graphics (CG) is a small manufacturer of electronic products for computers with graphics capabilities. The company has succeeded by being veryinnovative in product design. As a spin-off of a large electronics manufacturer (ElecTech), CG management has extensive experience in both marketing and manufacturing in the electronics industry.A long list of equity investors is betting that the firm will really take off because of the growth ofspecialized graphics software and the increased demand for computers with enhanced graphics capability. A number of market analysts say, however, that the market for the firm’s products is somewhatrisky, as it is for many high-tech start-ups, because of the number of new competitors entering themarket and CG’s unproven technology.[LO 9-1, 9-2, 9-3][LO 9-1, 9-2, 9-3, 9-5]Final PDF to printerblo17029_ch09_314-354.indd 351 02/19/18 09:08 AMChapter 9 Short-Term Profit Planning: Cost-Volume-Profit (CVP) Analysis…arrow_forward
- Tutorial Questions Explain to John, your mentor, the primary goal of the organization? Your manager is requesting you to provide an explanation to the question. Would the role of a financial manager be likely to increase or decrease in importance if the rate of inflation increased? What is the difference between stock price maximization and profit maximization? What are the three principal forms of business organization? What are the advantages and disadvantages of each? What mechanisms exist to influence managers to act in shareholders’ best interests? What is an agency relationship? What agency relationships exist within a corporation? What are financial intermediaries, and what economic functions do they perform? How does an efficient capital market help to reduce the prices of goods and services? What is the term structure of interest rates? What is a yield curve? How should users and savers of…arrow_forwardPlease answer ASAP.Financial performance measures are essential tools used by managers to evaluate the financialhealth of their organization. They provide an overview of the company's financialperformance, help identify areas of improvement, and support decision making.CarniTrin is a manufacturer of Carnival costumes in a highly competitive market. Thecompany's management team is seeking guidance on the use of financial performancemeasures to identify the key drivers of the company's financial performance and develop astrategy to improve it.The following data relate to the company for the year 2019: In its clothing division, the company has $4,000,000 invested in assets. After-taxoperating income from sales of clothing in 2019 is $700,000. Income for the clothingdivision has grown steadily over the last few years. The cosmetics division has $12,000,000 invested in assets and an after-tax operatingincome in 2019 of $1,700,000. The weighted-average cost of capital for CarniTrin is 10%…arrow_forwardQUESTION Qualitative characteristics make accounting information useful for decision-making purposes. Identify the qualitative characteristic that is being adopted or not adopted for each of the following situations. You may copy and paste from this list: comparability consistency confirmatory value faithful representation materiality predictive value relevance timeliness understandability verifiability 1. The quality of Walmart's financial information helps its users to correct their prior expectations on share prices. 2. Walmart is the only company in its industry to depreciate its plant assets on a straight-line basis. 3. Walmart switches from first-in first-out (FIFO) to average-cost (AVCO) and then back to FIFO over a 2-year period. 4. Walmart does not issue its first-quarter report until after the second-quarterarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning