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(Solution) The DuPont Analysis - PDF

   

Added on  2021-04-20

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Running head: AUDITAuditName of the Student:Name of the University:Authors Note:

AUDIT1Table of ContentsDuPont Analysis..............................................................................................................................2Common size Statement analysis....................................................................................................2Common Size income Statement:................................................................................................2Common Size Balance Sheet.......................................................................................................3Trend Analysis.................................................................................................................................3Income Statement Analysis.........................................................................................................3Balance sheet Analysis................................................................................................................3Beneish M Score Analysis:..........................................................................................................4Reference.........................................................................................................................................5

AUDIT2DuPont AnalysisThe DuPont analysis is focused on analyzing the return on equity that is generated by thecompany for its shareholders. For this the product of three ratios that is Total asset turnover ratio,profit margin and financial leverage is calculated. Significant indication can be found from theDuPont analysis done in the table. In the year 2001 all, the three ratios increased thereby creatingmaximum ROE (Gitman et al. 2015). However in the year 2002 and 2003 the profit marginincreased to 30% and remained there while the other two ratios i.e. Total asset turnover ratio andfinancial leverage started decreasing thereby resulting in a decrease in the ROE of the companyfrom 25% to 14%. After 2003 the profit margin kept on decreasing over the years along with nosignificant increase in the other two ratios thereby the ROE of the company decreased from 14%in the year 2003 to 8% in the year 2007. The company should focus on increasing its profitmargin in order to create value for the shareholders in terms of increased ROE.Common size Statement analysisCommon Size income Statement:From common size income statement, the following trends can be found very evidently:a)The company was able to generate good EBITDA between 2000 and 2003 with 54%being the highest in the year 2001. Thereafter the company’s EBITDA has shown adownward trend that has resulted the EBITDA to drop to a minimum level of 19% in theyear 2007. This is an adverse indication that the company’s earnings are reducingsignificantly over the years.b)The EBIT of the company has followed more or less the same trend as that of theEBITDA due to the fact that the depreciation of the company has not experienced verysignificant change over the years the highest being 4 and the lowest being 1. Thus the

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