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Return on Equity and Price Earnings Ratio

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For this assignment, you will use your newly acquired knowledge of the Price-earnings Ratio and the DuPont Model to perform an equity analysis for The ABC firm for the years 2012 and 2013.
The following financial information is available for your use:
- Revenue: $130,500,000 (2012); $202,560,000 (2013).
- Net Income: $22,740,000 (2012); $44,563,000 (2013).
- Assets: $210,000,000 (2012); $206,700,000 (2013).
- Shareholders' Equity: $146,500.000 (2012); $148,824,000 (2013).
- Market Value Per Stock Share: $23.15 (2012); $28.22 (2013).
- Earnings Per Share: $2.87 (2012); $4.10 (2013).
- Industry Average ROE: 22.5% (2012); 27.3% (2013).
- Industry Average Price/Earnings Ratio: 7.7 (2012); 8.2 (2013).

Compute and analyze the following:
- Compute the return on equity (DuPont Model) for 2012 and 2013 and show all intermediate calculations to arrive at the ROE figure.
- Analyze the return on equity (DuPont Model) change from 2012 to 2013, comparing it with the industry average ROE given in the assignment. In two paragraphs or less, write up your analysis discussing the positive and negative aspects of the company's performance.
- Compute the Price-earnings Ratio for 2012 and 2013 and show all your calculations.
- Analyze the Price-earnings Ratio change from 2012 to 2013, comparing it with the industry average Price-earnings Ratio for each year. In two paragraphs or less, write up your analysis discussing the positive and negative aspects of the company's Price-earnings performance.
- Combine your analysis of the ROE and Price-earnings Ratio into a single memo that will be sent to all senior management. In addition to your analysis of the changes from 2012 to 2013, outline your recommendations for the year 2014.

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Solution Summary

This solution provides calculations of ROE and P/E ratio along with explanations for both.

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Manufacturing company's annual report

Find a manufacturing company's annual report.

Calculate the following ratios for the company ( company selected below) selected:

Return on Assets
Return on Equity
Gross Profit Margin
Debt/Equity Ratio
Debt Ratio
Current Ratio
Quick Ratio
Inventory Turnover
Total Asset Turnover
Price Earnings Ratio
Using the calculated ratios, analyze the financial performance of the firm. In a memo to the CEO, explain the ratios calculated. Also address other methods of analyzing financial statements besides ratio analysis. Lastly, explain your analysis of the firm, making recommendations for improvements.

For this task please use the following company:

Tootsie Roll Corporation (2006) http://www.tootsie.com

Calculate the following ratios for 2006: (NOTE 2006)

Return on Assets
Return on Equity
Gross Profit Margin
Debt Ratio
Current Ratio
Debt/Equity Ratio
Inventory Turnover
Quick Ratio
Price Earnings Ratio
Total Asset Turnover

Using the calculated ratios, analyze the financial performance of the firm

In a memo to the CEO, explain the ratios calculated

Also address other methods of analyzing financial statements besides ratio analysis

Lastly, include within your analysis of the firm, recommendations for improvements

2000 words - original work - apa format references - original work

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