Data for Morton Chip Company and its industry averages follow.Calculat

QUESTION

Data for Morton Chip Company and its industry averages follow.Calculate the indicated rationsConstruct the extended DuPont equation for both Morton and the industryOutline Mortons strengths and weaknesses aas revealed by your analysisSuppose Morton had doubled its sales as well as its inventories, ¦
The ratios for Morton given the Balance Sheet and Income Statement numbers are: CA/CL = 1.98 DSO = 76.29 Sales/Inv = 6.66 Sales/FA = 5.50 Sales/TA = 1.70 NI/Sales = 1.70% NI/TA = 2.88% NI/CE = 7.56% TD/TA = 35.94% Extended DuPont is used to find ROE (Return on Equity). ROE = (Net Income)/(Shareholders Equity) Extended expands this to include three others 1.) Net Income/Sales 2.) Sales/Total Assets 3.) Total Assets/Total Shareholders Equity If you multiply these together you get ROE. You can check this by¦

cross multiplying and canceling out terms until you get to Net Income/Shareholders Equity which is ROE. For Morton: 1.) 1.7% 2.) 1.70x 3.) 2.62x Multiplying those together gives you 7.56% which is what we got from NI/Sales. For the Industry: 1.) 1.20% 2.) 3.00x 3.) 2.50x Multiplying those together gives you 9.0% or the ROE of the industry.

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