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An analysis of company performance using DuPont analysis wheat of papers in her hand, your friend and colleague, Madison, steps into your office and asked the following. MADISON: Do you have 10 or 15 minutes that you can spare? You: Sure, Tve got a meeting in an hour, but t don't want to start samething new and then be intemupted by the meeting: so how can 1 help? MAD1SON: Tve been reviewing the company's financial statements and looking for ways to improve our perfocmance, in general, and the company's retirn on equity, or ROE, in particular. Xaviec, my new team leader, suggested that I start by using a Ouipont anaivsik, and Id like to run my numbers and conclistions by you to tee whether Tve missed anything: Here are the talanol sheet and incame statement data that Xwier gave me, and here are my notes with my calculations, coilid you start by making sure that my numbers are correct? You: Give me a minuto to loak of these financial ctatements and to remember what i know about the Dupont anaiysis. If I remember cosrectiy, the Dupont equation breaks down our RoE in to three component ratios: the the total asset furnover ratio, and the And, according to my understanding of the DuPont cquason and its calculatian of ROE, the three ratios provide insights into the company's wse of debt versus eeblity tinanding , effectiveness in using the company's assete, and Now, fet's see your notes with your ratog, and then we can talk sbout posshie strategles that will improve the ration, fim ooing to check the bok to the tate of your calculated vahie if your calcilation is correct ang leave it unchecked if your calculation is incorrect. MAD1SON: OK, it looks libe tive got a couple of incorrect values, so show ma your calcilations, and ther we can tak stratigies for improvement. Yout tye just made rowh calculations, so let me complete this table by inputting the components of each ratio and its valuet. Do not round intermediate coltuiations and round your fnial answens us to two decimal. Canis Major: Veterinary Supplies Inc. DuPont Analysis MAD15ON: 1 see what 1 did wrong in my computations. Thanks foc roviewing these calculations with me, You saved me from a lot of embarrassment Xivier would have been very disaspointed in me if I nad showed him my orignal work: 5o, now iet's rwitch toples and identify general strategliss that could be used to pos tively affect Canis Majers RoE. Vou: cik, so given your knowiedje of the component intios used in the Duffons equation, which af the foliowing itrategies stiould impreve the companyli fOE? Check all that apoly. Reduce the company's operating expenses, its cost of goods sold, and/or the interest rate on its borrowed funds because this wis increase the company's net proft margin. Decrease the amount of debt financing used by the company. Which wil decrease the fotal assets tumover ratio. Increase the effiency of its assets so that it generates more sales with each dollar of assec investunent and increases the campany's total assets turnover. Increase the firm's bottom-line profitabiity for the same volume of saies, which will increase the comstany' net profit margin. fover

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