Problem
Interpreting results from the Du Pont system of analysis
Assume the following data for Cable Corporation and Multi-Media, Inc.
|
|
Cable
Corporation
|
Multi
Media, Inc.
|
|
Net income
|
$
|
30,700
|
|
$
|
139,000
|
|
|
Sales
|
|
314,000
|
|
|
2,120,000
|
|
|
Total assets
|
|
468,000
|
|
|
925,000
|
|
|
Total debt
|
|
194,000
|
|
|
478,000
|
|
|
Stockholders' equity
|
|
274,000
|
|
|
447,000
|
|
| |
1) Compute return on stockholders' equity for both firms.
|
|
Return on
stockholders' equity
|
|
Cable Corporation
|
|
|
Multi Media, Inc.
|
|
|
2) Which firm has the higher return?
(b) Compute the following additional ratios for both firms.
|
|
Cable Corporation
|
Multi-Media, Inc.
|
|
Net income / Sales
|
|
|
|
Net income / Total assets
|
|
|
|
Sales / Total assets
|
|
|
|
Debt / Total assets
|
|
|
|