Perform Dupont Analysis for ABC Company and XYZ Company, using the information for 2016 below. Explain what Dupont Analysis is telling you about the performance of these two firms. Note – you may not need to use all of the information included here.
Firm ABC:
Total Asset Turnover = 1.5
Net Profit Margin = 6%
Receivables Turnover = 4.1
Leverage Measure (TA/TE) = 2
Firm XYZ
Total Asset Turnover = 2.0
Net Profit Margin = 4%
Receivables Turnover = 3.2
Leverage Measure (TA/TE) = 1.5
a. Calculate return on equity for both firms. You may not need all information provided.