Question

Calculate ROA and ROE ratios of your selected company for 3 years based on DuPont Ratio. Analyze the trend and explain the reason of the increase/decrease in those ratios.

Provide a table of three years Actual and five years forecast of income Statements of your selected company. Include the assumptions that you used for your forecast. For example how did you calculate future revenues, expenses, and other items and why?

Breakdown	2019	2018	2017	2016
Total Revenue	4'509'000	4'313'200	4'088'400	3'900'900
Cost of Revenue	1'517'600	1'434'000	1'425'300	1'376'200
Gross Profit	2'991'400	2'879'200	2'663'100	2'524'700
Operating Expenses
Selling General and Administrative	-	-	-	0
Total Operating Expenses	2'398'400	2'242'500	2'065'700	1'959'500
Operating Income or Loss	593'000	636'700	597'400	565'200
Interest Expense	35'000	18'800	15'600	14'100
Income Before Tax	561'100	620'600	582'800	554'100
Income Tax Expense	49'200	133'500	130'300	134'300
Income from Continuing Operations	511'900	487'100	452'500	419'800
Net Income	509'600	485'100	450'700	419'700
Net Income available to common shareholders	509'600	485'100	450'700	419'700
EBITDA	918'900	818'900	767'400	719'700

Intangible Assets	603,700	602,100	610,000	620,800
Total non-current assets	5,065,100	4,316,800	4,194,500	4,054,300
Total Assets	8,040,800	7,249,800	6,975,600	6,428,800
Liabilities and stockholders' equity
Liabilities
Current Liabilities
Current Debt	505,500	12,300	9,200	316,400
Accounts Payable	233,900	214,200	217,300	180,400
Total Current Liabilities	1,689,700	1,028,100	1,049,800	1,258,900
Non-current liabilities
Long Term Debt	498,500	998,700	998,200	748,900
Deferred taxes liabilities	541,500	467,000	444,200	433,500
Other long-term liabilities	5,900	6,600	7,700	7,600
Total non-current liabilities	1,680,900	1,735,300	1,730,800	1,495,900
Total Liabilities	3,370,600	2,763,400	2,780,600	2,754,800
Stockholders' Equity
Common Stock	24,300	24,300	24,100	23,700
Retained Earnings	4,982,200	4,655,400	4,246,200	3,743,800
Total stockholders' equity	4,659,800	4,477,300	4,186,300	3,667,200
Total liabilities and stockholders' equity	8,040,800	7,249,800	6,975,600	6,428,800

Answer 1

		Return on Assets (ROA)
		ROA=(Net Income /Sales)*(Sales/Average Total Assets)
		ROA=Net Profit Margin*Asset Turnover
		Average Total Assets=(Year Beginning Asset +Year Ending asset)/2
		Average Total Assets 2017	6702200	(6428800+6975600)/2
		Average Total Assets 2018	7112700	(6975600+7249800)/2
		Average Total Assets 2019	7645300	(7249800+8040800)/2
			2017	2018	2019
	A	Net Income	450700	485100	509600
	B	Sales	4088400	4313200	4509000
	C	Average Total Asset	6702200	7112700	7645300
	D=A/B	Net Profit Margin	0.110239	0.112469	0.11301841
	E=B/C	Asset Turnover	0.610009	0.606408	0.58977411
	ROA=D*E	Return on Assets	0.067247	0.068202	0.06665533
		Return on Assets Percentage	6.72%	6.82%	6.67%
		Return on Equity (ROE)
		ROE=(Net Income /Sales)*(Sales/Average Total Assets)*(AverageTotal Assets/Average Shareholder Equity)
		ROE=ROA*(AverageTotal Assets/Average Shareholder Equity)
		ROE=ROA*Financial Leverage
		Average Shareholder Equity 2017	3926750	(3667200+4186300)/2
		Average Shareholder Equity 2018	4331800	(4186300+4477300)/2
		Average Shareholder Equity 2019	4568550	(4477300+4659800)/2
			2017	2018	2019
	F	ROA	0.067247	0.068202	0.06665533
	G	Average Total Assets	6702200	7112700	7645300
	H	Average Shareholder Equity	3926750	4331800	4568550
	I=G/H	Financial Leverage	1.706806	1.641973	1.67346313
	ROE=F*I	Return on Equity	0.114777	0.111986	0.11154524
		Return on Equity Percentage	11.48%	11.20%	11.15%