Analyzing Companies Using the DuPont Formula
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Using the data in the following table for a number of firms in the same industry, do
the following:
a. Compute the total asset turnover, the net profit margin, the equity multiplier,
and the return on equity for each firm.
b. Evaluate each firm's performance by comparing the firms with one another.
Which firm or firms appear to be having problems? What corrective action
would you suggest the poorer performing firms take? Finally, what additional
data would you want to have on hand when cond7ucting your analyses?
Firm
(in Millions of Dollars) A B C D
Sales $20 $10 $15 $25
Net income after tax 3 0.5 2.25 3
Total assets 15 7.5 15 24
Stockholders' equity 10 5.0 14 10
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Solution Summary
This solution illustrates how to analyze firms' comparative performance using the DuPont Analysis.
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