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Compute and Interpret Measures for DuPont Disaggregation Analysis
Refer to the 2015 fiscal year financial data of 3M Company to answer the following requirements (perform these computations from the perspective of a 3M shareholder).
($millions) 2015 2014
Sales $30,674
Net income, consolidated 5,056
Net income attributable to
3M shareholders 5,048
Assets 32,898 $31,389
Total equity 11,747 13,142
Equity attributable to 3M
shareholders 11,708 13,109
a. Compute the DuPont model component measures for profit margin, asset turnover, and financial leverage. Then, compute ROA.
b. Compute ROE. Confirm that ROE equals ROE computed using the component measures from part a (ROE PM AT FL).
c. Compute adjusted ROA (assume a statutory tax rate of 37% and pretax net interest expense of $123).

Sagot :

ogorwyne

Answer:

solving

Explanation:

ROE = Net income/total assets

5048/(11708+13109)/2

= 0.4068

= 40.68%

A.

net margin = net profit/sales

= 5048/30674

= 0.1646

asset turnover = sales/average total asset

= 30674/(32898+31389)/2

= 0.954

equity multiplier

average total asset/average equity

= [(32898+31389)/2] / [11708+13109)]/2

= 32143.5/12408.5

= 2.59

DuPont model

ROE = 0.1646 x 0.9542 x 2.59

= 0.4068

= 40.68%

this shows that roe equals roe computed from the first roe I solved

ROA

net income/total assets

= 5048/32898+31389)/2

= 5048/32143.5

= 0.1570

= 15.47%

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