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Graded Discussion Week 1 Please note that if you edit your initial response (Original Post), you will not get credit for the Original Post. The discussions are set up as "Must post first". ROE and...

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Graded Discussion Week 1

Please note that if you edit your initial response (Original Post), you will not get credit for the Original Post. The discussions are set up as "Must post first".

ROE and DuPont analysis

Step 1:Read the articles.These articles containexamplesof using DuPont formula to analyze ROE. You will be using these example to answer the questions listed at the bottom of the topic description.

  1. How Did Deltic Timber Corporation's (DEL) 3.41% ROE Fare Against The Industry? –ByLiz Campbell

Simply Wall St. October 5, 2017

https://finance.yahoo.com/news/did-deltic-timber-corporation-del XXXXXXXXXXhtml

2) With A Recent ROE Of 3.33%, Can Glen Burnie Bancorp (GLBZ) Catch Up To Its Industry?-By Brent Freeman

Simply Wall St. October 5, 2017

https://finance.yahoo.com/news/recent-roe-3-33-glen XXXXXXXXXXhtml

3) What You Must Know About Continental Materials Corporation's (CUO) Return on Equity-By Bernadette Hatcher

Simply Wall St. October 5, 2017

https://finance.yahoo.com/news/must-know-continental-materials-corporation XXXXXXXXXXhtml

Step 2: Answer all discussion questions.

Youmustchoose a company for your project and one of its peer competitor. When choosing your company, you can choose any company that has been publicly traded for at least five years.Make sure you can find financial statementsand detailed information about your company. Anyone can choose any company so don't worry about choosing a different one from your classmates. Nike, Disney, Microsoft, Wal-Mart, Apple, Amazon, Costco, Pfizer, Boeing, Target, GE, Starbucks, etc. would all be viable options.

For this discussion you will get financial information usingwww.morningstar.comwebsite.

Please long inwww.morningstar.com

Type the stock symbol in the search window. This is the window just below the title MORNINGSTAR on the top of the screen.

Once you have your company page, click onKey Ratios.

Click onFull Key Ratios Data.

ROE and it's components for DuPont formula can be found under Profitability. Debt/equity ratio can be found under Key Ratios – Financial Health.

To get the list of competitors now you need to click onAnalysis- and click onCompetitors.

Your assignment:

Please also note that your answers should be written in your own words. Don't use quotes from the articles.

You are expected to make your own contribution in a main topic as well as respond with value added comments to at least two of your classmates as well as to your instructor.

In your initial response to the topic you have to answerallquestions.

  1. Find ROE, Net profit margin (listed as net margin), asset turnover, financial leverage for thelast three yearsfor your company. You also may use debt/equity ratio in your analysis.Present ratios in your posting as a table.
  2. Find ROE, Net profit margin (listed as net margin), asset turnover, financial leverage for thelast yearfor its major peer competitor. You also may use debt/equity ratio of peer competitor in your analysis.Present ratios in your posting as a table.
  3. Has the company's ROE changed over the last three years? What was the main factor that influenced this change?
  4. Compare the ratios of you company to the peer competitor. If the management of the company would like to improve the company's return on equity, what should the management of the company do?
  5. Reflection – the students also should include a paragraphin the initial responsein their own words reflecting on specifically what they learned from the assignment and how they think they could apply what they learned in the workplace.
Answered 2 days After Mar 16, 2022

Solution

Sandeep answered on Mar 19 2022
103 Votes
2
ROE and DUPONT ANALYSIS
Ansa 3
Yes the Company’s ROE has changed significantly over the last 3 years as is evident form the Table 1 below:
    Walmart Inc.
    DUPONT RATIOS
    2021
    2020
    2019
    ROE
    17.29%
    20.71%
    9.54%
    Net Profit Margin
    2.42%
    2.84%
    1.30%
    Assets Turnove
    2.29
    2.30
    2.43
    Financial Leverage
    3.12
    3.17
    3.02
    Debt /Equity Ratio
    0.72
    0.86
    0.69
We need to understand that the ROE does not consider the Debt component of Capital in calculations. The main reason for significant improvement displayed by the Walmart Inc. in last 3years over its close peers/competitors is as follows:
a) ROE merely exhibit the Trailing period (i.e. previous year) earning or profit measured against the book value of Shareholder’s equity holding.
) Walmart Inc. has strong Balance sheet in terms of Debt/Equity ratio at .72 cu
ently which is less than over 100% .Therefore low amount of debt at modest level has contributed to improving the ROE of company .
c) The Biggest reason for Walmart ROE changing is that it operates with less Leverage than its competitors or peers. It is able to manage its operation better.
d) The company is successfully able to pay off its debt from its profit and keep leverage within manageable limit. Only 60% of its assets are financed through debt.
e) Another advantage of the Walmart’s low leverage ratio is that it helps shield the company from the fluctuation and vagaries of the hostile rising interest rates.
f) Walmart is able to generate more than $ 18 of Net income /profit for its shareholder from every $ 1 of the equity investment by shareholder.
g) Walmart has higher ROE than Other retail players in the industry which are...
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