Question

DuPont identity.  For the firms in the popup​ window,

Answer 1

Answer:

Pepsi

Profit margin = Net Income / Sales

Profit margin = $6,736/$66,466

Profit margin = 10.13%

Asset turnover = Sales / Total assets

Asset turnover =  $66,466/$77,300

Asset turnover = 0.86

Equity multiplier = Total assets / Equity

Equity multiplier = $77,300 / ($77,300 - $53,143)

Equity multiplier = 3.20

Return on Equity = Profit margin * Asset turnover * Equity multiplier

Return on Equity = 10.31% * 0.86 * 3.20

Return on Equity = 0.2837312

Return on Equity = 28.40%

Equity = Total asset - Liabilities

Equity = $77,300 - $53,143

Equity = $24,157

Thus, the equity for PepsiCo is $24,157

Coca Cola

Profit margin = Net Income / Sales

Profit margin = $8449/$46,726

Profit margin = 18.08%

Asset turnover = Sales / Total assets

Asset turnover = $46726/$89902

Asset turnover = 0.52

Equity multiplier = Total assets / Equity

Equity multiplier = $88902 / ($88902 - $56900)

Equity multiplier = 2.72

Return on Equity = Profit margin * Asset turnover * Equity multiplier

Return on Equity = 18.08% * 0.52 * 2.72

Return on Equity = 0.25572352

Return on Equity = 25.60%

McDonald

Profit margin = Net Income / Sales

Profit margin = $5726/$28033

Profit margin = 20.43%

Asset turnover = Sales / Total assets

Asset turnover = $28033/$36599

Asset turnover = 0.77

Equity multiplier = Total assets / Equity

Equity multiplier = $36599 / ($36599 - $20671)

Equity multiplier = 2.30

Return on Equity = Profit margin * Asset turnover * Equity multiplier

Return on Equity = 20.43% * 0.77 * 2.30

Return on Equity = 0.3618153

Return on Equity = 36.20%