EBK PRINCIPLES OF MANAGERIAL FINANCE
14th Edition
ISBN: 8220100666759
Author: ZUTTER
Publisher: PEARSON
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Chapter 3, Problem 3.5WUE
Learning Goal 6
E3-5 If we know that a firm has a net profit margin of 4.5%, total asset turnover of 0.72, and a financial leverage multiplier of 1.43, what is its
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D4)
Of the following 4 firms, which one should have the highest dividend payout ratio? Group of answer choices Firm C, which has annual revenue growth of 7%, and has cash of 25% of assets. Firm A, which has annual revenue growth of 25% and has cash of 5% of assets. Firm B, which is growing revenue annually at 21% and has cash of 10% of assets. Firm D, which has annual revenue growth of 10%, and has cash of 7% of assets.
DuPont identity. For the firms in the popup window,
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,
find the return on equity using the three components of the DuPont identity: operating efficiency, as measured by the profit margin (net income/sales); asset management efficiency, as measured by asset turnover (sales/total assets); and financial leverage, as measured by the equity multiplier (total assets/total equity).
First, find the equity of each company.
The equity for PepsiCo is
$nothing
million. (Round to the nearest million dollars.)
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Financial Information ($ in millions, 2013)
Company
Sales
Net Income
Total Assets
Liabilities
PepsiCo
$66,352
$6,769
$77,328
$53,162
Coca-Cola
$46,818
$8,528
$90,042
$56,761
McDonald's
$28,089
$5,826
$36,544
$20,553
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7.________ measures the percentage of each sales dollar remaining after all costs and expenses, including interest, taxes, and preferred stock dividends, have been deducted.
A) Net profit margin
B) Operating profit margin
C) Gross profit margin
D) Earnings available to common shareholders
8.________ measures the return earned on the common stockholders' investment in the firm.
A) Net profit margin
B) Price/earnings ratio
C) Return on equity
D) Return on total assets
Chapter 3 Solutions
EBK PRINCIPLES OF MANAGERIAL FINANCE
Ch. 3.1 - Prob. 1FOECh. 3.1 - Prob. 2FOECh. 3.1 - Prob. 3.1RQCh. 3.1 - Describe the purpose of each of the four major...Ch. 3.1 - Prob. 3.3RQCh. 3.1 - Prob. 3.4RQCh. 3.2 - With regard to financial ratio analysis, how do...Ch. 3.2 - What is the difference between cross-sectional and...Ch. 3.2 - Prob. 3.7RQCh. 3.2 - Prob. 3.8RQ
Ch. 3.3 - Under what circumstances would the current ratio...Ch. 3.3 - In Table 3.5, most of the specific firms listed...Ch. 3.4 - To assess the firms average collection period and...Ch. 3.5 - What is financial leverage?Ch. 3.5 - What ratio measures the firms degree of...Ch. 3.6 - What three ratios of profitability appear on a...Ch. 3.6 - Prob. 3.15RQCh. 3.6 - Prob. 3.16RQCh. 3.7 - Prob. 3.17RQCh. 3.8 - Financial ratio analysis is often divided into...Ch. 3.8 - Prob. 3.19RQCh. 3.8 - What three areas of analysis are combined in the...Ch. 3 - Prob. 1ORCh. 3 - Learning Goals 3, 4, 5 ST3-1 Ratio formulas and...Ch. 3 - Prob. 3.2STPCh. 3 - Prob. 3.1WUECh. 3 - Learning Goal 1 E3-2 Explain why the income...Ch. 3 - Prob. 3.3WUECh. 3 - Prob. 3.4WUECh. 3 - Learning Goal 6 E3-5 If we know that a firm has a...Ch. 3 - Financial statement account identification Mark...Ch. 3 - Prob. 3.3PCh. 3 - Prob. 3.4PCh. 3 - Prob. 3.5PCh. 3 - Prob. 3.6PCh. 3 - Prob. 3.8PCh. 3 - Prob. 3.9PCh. 3 - Prob. 3.10PCh. 3 - Prob. 3.11PCh. 3 - Learning Goals 2, 3, 4, 5 P3-10 Ratio comparisons...Ch. 3 - Prob. 3.13PCh. 3 - Prob. 3.14PCh. 3 - Accounts receivable management The table below...Ch. 3 - Prob. 3.18PCh. 3 - Prob. 3.20PCh. 3 - The relationship between financial leverage and...Ch. 3 - Prob. 3.22PCh. 3 - Prob. 3.23PCh. 3 - Prob. 3.24PCh. 3 - Prob. 3.25PCh. 3 - Prob. 3.27PCh. 3 - Prob. 1SE
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- DuPont Analysis Gardial & Son has an ROA of 12%, a 4% profit margin, and a return on equity equal to 20%. What is the company's total assets turnover? What is the firm's equity multiplier? Do not round intermediate calculations. Round your answers to two decimal places. Total assets turnover: Equity multiplier:arrow_forwardRequirement 1. Compute the following ratios for both companies for the current year, and decide which company’s stock better fits your investment strategy. a. Acid-test ratio b. Inventory turnover c. Days’ sales in receivables d. Debt ratio e. Earnings per share of common stock f. Price/earnings ratio g. Dividend payoutarrow_forwardThe company’s ratios are: Current ratio = 1.58% Quick ratio = 1.53% operating margin = 3.49% profit margin = 1.86% return on total assets (ROA) = 1.75% return on common equity (ROE) = 7.03% PE ratio = 24.50% You are an investor with a large sum of money (or a company looking for an investment) and buying either the company or shares of stock in the company is being considered. Determine, based on the company’s financials and its future business prospects, whether you will invest in this company or not. In order to support your conclusions, be sure to reference your ratios and ratio analysis.arrow_forward
- Question A .Consider the following firms: Net Income this Year Stock price at beginning of year Stock price at end of year Firm A $ 10,000,000 $ 20 $ 10 Firm B $ 8,000,000 $ 10 $ 20 a) The manager of firm A is doing a better job than B b) The manager of firm B is doing a better job than A c) Neither manager is doing a good job d) Both managers are doing a good job Full explain this question and text typing work only We should answer our question within 2 hours takes more time then we will reduce Rating Dont ignore this linearrow_forwardGardial & Son has an ROA of 9%, a 4% profit margin, and a return on equity equal to 20%. What is the company's total assets turnover? What is the firm's equity multiplier? Do not round intermediate calculations. Round your answers to two decimal places. Total assets turnover: Equity multiplier:arrow_forwardYou have the following ratios for a firm you're analyzing: Working capital / total assets = 0.7 Retained earnings / total assets = 0.3 EBIT / total assets = 0.2 market value of equity / book value of LT debt = 1.3 sales / total assets = 0.4 Calculate the firm's Z-score. Enterarrow_forward
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