Kel 10 AF-Tugas Kelompok1

TUGAS ACCOUNTING AND FINANCE
CHAPTER 4: ANALYSIS OF FINANCIAL STATEMENTS
Nama = Cristho Simanjuntak Dosen=Vogy Gautama Buanaputra, M.Sc., Ph.D., AFHEA

 Heru Purbo Wiyoto
 Mayang Syafira Lintang Kelas =SEMBA 45A Jakarta
Kelompok=10 Tugas =Kelompok 1
4-24 DUPONT ANALYSIS

A firm has been experiencing low profitability in recent years. Perform an analysis of the firm’s financial
position using the DuPont equation. The firm has no lease payments but has a $2 million sinking fund
payment on its debt. The most recent industry average ratios and the firm’s financial statements are as
follows
a. Calculate the ratios you think would be useful in this analysis.
b. Construct a DuPont equation and compare the company’s ratios to the industry average ratios.
c. Do the balance sheet account or the income statement figures seem to be primarily responsible
for the low profits?
d. Which specific accounts seem to be most out of line relative to other firms in the industry?
e. If the firm had a pronounced seasonal sales pattern or if it grew rapidly during the year, how
might that affect the validity of your ratio analysis? How might you correct for such potential
problems?
Answer
a. Calculate the ratios you think would be useful in this analysis
 Current Ratio = Current Assets
Current liabilities
= $303$85
= 3,565
 Debt to total assets = DEBT

Total Assets
= $135
$450
= 30%
 Time interest earned = EBIT

Interest Expense
= $49,5
$4,5
= 11
 EBITDA Coverage = EBITDA + Lease payments
Interest + principal payments + lease payments
= $61,5
$4,5
 Inventory Turnover = COGS
Inventories
= $660
$159
= 4.15
 Days inventory outstanding = Inventory

COGS/365
= $159
$660/365
= 87.93 days
 Days sales outstanding = Account receivable

Sales/365
= $66
$795/365
= 30,3 days
 Days payable outstanding = Account Payable
COGS/365
= $45
$660/365
= 24.89 days
 Fixed assets turnover = Sales
Net fixed assets
= $795
$147
= 5,41
 Total assets turnover = Sales

Total Assets
= $795
$450
= 1,77
 Profit margin = Net Income

Sales
= $27
$795
= 3,40%
 Return on total assets (ROA) = Net Income

Total Assets
= $27
$450
= 6,00%
 Return on common equity (ROCE) = Net Income

Total Equity
= $27
$315
= 8,57%
 Return on invested capital (ROIC) = EBIT (1-T)

Total invested capital
= $49,5 (1-0,4)
$27
=11%
Ratios Firm Industry
Current Ratio 3,565x 3x
Debt-to-capital ratio 30%x 20%
Time interest earned 11x 7x
EBITDA Coverage 4.5x 9x
Inventory Turnover 4.15x 10x
Days inventory outstanding 87.93 15 days

days
Account Payable turn over 14.6x 6.6x
Days payable outstanding 24.89 55 days

days
Days sales outstanding 30,3 days 24 days
Fixed assets turnover 5,41x 6x
Total assets turnover 1,77x 3x
Profit margin 3,40% 3%
Return on total assets 6,00% 9%
Return on common equity 8,57% 12,86%
Return on invested capital 11% 11,50%
b. Construct a DuPont equation and compare the company’s ratios to the industry average ratios.
ROE= ROA x Equity Multiplier
= Profit margin x Total assets turnover x Equity multiplier
= Net Income x Sales x Total assets
Sales Total Assets Total Common Equity
= $27 x $795 x $450
$795 $450 $315
= 3,40% x 1,77 times x 1,43 times
Firm Industry Comment
Profit Margin 3,40% 3% OK
Total Assets Turnover 1,77x 3x Poor
Equity Multiplier 1,43x 1x OK
ROE 8,61%
c. Do the balance sheet account or the income statement figures seem to be primarily responsible
for the low profits? Ans: Based on Financial Statement, Balance sheet primarily responsible for
the low profit, because as following:
- DIO (Days Inventory Outstanding) = Inventory
COGS/365
= $159
$660/365
= 87.93 days (4.15 x in a year)
Which means the days inventory outstanding turn over its so long (88 per days or 4.15 times in
annual), that will be impact to revenue, because inventory cannot be sold and generates
revenue
- DPO (Days Payable Outstanding) = Account Payable
COGS/365
= $45
$660/365
= 24.89 days (or 14.6 x in a year)
In this case, it means that payments to suppliers tend to be faster, namely 14.6x for one year or
every 24.89 days, while the turnover inventory is only 4.15x for one year or every 87.93 days.
This will have an impact to company cash flow to finance operational activities to be generate
revenue and profit also decreasing turn over assets
d. Which specific accounts seem to be most out of line relative to other firms in the industry?
Ans: Specific accounts most out of line relative to other firm industry is:
- Inventory Turnover (4.15x) vs most other firm in the industry (10x)
- AP turn over (14.6x) vs most other firm in the industry (6.6x)
- Total assets turnover (1.77x) vs most other firm in the industry (3x)
e. If the firm had a pronounced seasonal sales pattern or if it grew rapidly during the year, how
might that affect the validity of your ratio analysis? How might you correct for such potential
problems?
Ans: If the firm grew rapidly, 5 Ratio analysis will be very useful to find out potential future
profits or mitigate risks to potential future losses.
To correct potential problems, it is necessary to made Key risk indicator (KRI). KRIs measure how
risky certain activities are in relation to business objectives. They provide early warning signals
when risks (both strategic and operational) move in a direction that may prevent the
achievement of KPIs. Most often executive management and the board.
The measure of risk management in the company can be done through scoring (based on
comparisons with the same industry) and stress tests.

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TUGAS ACCOUNTING AND FINANCE

CHAPTER 4: ANALYSIS OF FINANCIAL STATEMENTS

Nama = Cristho Simanjuntak Dosen=Vogy Gautama Buanaputra, M.Sc., Ph.D., AFHEA

4-24 DUPONT ANALYSIS

 Debt to total assets = DEBT

 Time interest earned = EBIT

 Days inventory outstanding = Inventory

 Days sales outstanding = Account receivable

 Total assets turnover = Sales

 Profit margin = Net Income

 Return on total assets (ROA) = Net Income

 Return on common equity (ROCE) = Net Income

 Return on invested capital (ROIC) = EBIT (1-T)

Debt-to-capital ratio 30%x 20%

Time interest earned 11x 7x

EBITDA Coverage 4.5x 9x

Inventory Turnover 4.15x 10x

Days inventory outstanding 87.93 15 days

Account Payable turn over 14.6x 6.6x

Days payable outstanding 24.89 55 days

Days sales outstanding 30,3 days 24 days

Fixed assets turnover 5,41x 6x

Total assets turnover 1,77x 3x

Profit margin 3,40% 3%

Return on total assets 6,00% 9%

Return on common equity 8,57% 12,86%

Return on invested capital 11% 11,50%

Firm Industry Comment

Profit Margin 3,40% 3% OK

Total Assets Turnover 1,77x 3x Poor

Equity Multiplier 1,43x 1x OK

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