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2. 
3. (Du Pont) 

 
Financial statement Combined Analysis
Balance sheet Financial ratios
I ncome statement Liquidity Ratios
Retained earnings Activity Ratios
Statement of Cash Debt Ratios
flows Profitability Ratios
Ratio Analysis M arket Ratios
DuPont system of
Cross-Sectional analysis
Analysis DuPont Formula
Time-SeriesAnalysis
 

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Current ratio -
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Quick ratio -


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1. Current ratio Current assets 
( = Current liabilities = 


2. Quick ratio Current assets- -

(- = I nventory = 
 Current liabilities 

3. Cash ratio Cash & M arketable 

(- = securities = 
 Current liabilities 
 
: BARLETT LLC
2013 2012

( $1,223 $1,004
= = 1.97 = 2.08
 $620 $483

(- $1,223-$289 $1,004-$300

= = 1.51 = 1.46
) $620 $483

(- $363+$68 $288+$51

= = 0.70 = 0.70
 $620 $483
 



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I nventory turnover (

Average collection period (


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Total assets turnover (

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1. I nventory Cost of goods 
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2. Average Accounts 
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3. Average payment Accounts payable 
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BARLETT LLC: 
2013 2012

I nventory turnover 2,088 $1,711

( = = 7.22 = 5.70
289 $300


Average collection period 503 365

( = = 59.73 = 51.19
$8.42 $7


Average payment period $382 $270

( = = 95.40 = 82.28
4.00 $3



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Sales 
4. Total assets turnover
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6. Equity turnover Sales

( = =

 Equity

 
BARLETT LLC: 
2013 2012

Total assets turnover $3,074 $2,567

= = 0.85 = 0.79
( $3,597 $3,270

Fixed assets turnover $3,074 $2,567

( = = 1.29 = 1.13
 $2,374 $2,266

Equity turnover ( $3,074 $2,567

 = = 1.57 = 1.41
 $1,954 $1,820


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(Financial Leverage)
(Coverage ratio)
(Debt ratio)
(Times interest earned
ratio)
(Fixed-
payment coverage ratio)



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2 .
-
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(Debt ratio)
-

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(the timesinterest earned ratio)
(fixed-payment
coverage ratio)
 


1. Debt ratio Total Debt 

= =
( Total Assets 

2. Debt To Equity ratio Total Debt 

( = = 
Total Equity

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Times interest earned
ratio I nterest coverage ratio .

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Fixed-
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3. Times interest Earnings before 
earned ratio interest and taxes 
( = =
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Earnings before 

4. Fixed- interest and taxes + 
payment Lease payments 
coverage ratio I nt. + Lease pay. + 
= =
( {(Prin. + Pref. div.) X 
 [1/(1 T)]} ^
 -
X [1/(1-T@`
 
 BARLETT LLC
2013 2012
Debt ratio ( $1,643 $1,450
= = 45.7% = 44.3%
 $3,597 $3,270
Debt to Equity ratio ( $1,643 $1,450
 = = 84.1% = 79.7%
$1,954 $1,820

Times interest earned ratio $418 $303
( = = 4.49 = 3.33
93 91

Fixed-payment coverage $453 $338
ratio ( = $242 = 1.87 $242 = 1.40

 



.



.


.
.
 

1.  (common size
income statements)
2. / (grossprofit margin)
3. / (operating
profit margin)
4. / (Net profit margin)
5. (Earnings per share-
EPS)
6. (return on total assets-ROA)
7. (return on common
equity-ROE)
 

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1. Gross profit Gross profits 
margin ( = Sales = 
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2. Operating Operating profits 
profit margin
(- = Sales = 



Earnings available for
3. Net profit 
common stockholders
margin ( = = 
 
Sales

 


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Earnings available for 
4. Earnings per share common stockholders 
(EPS) (
= =
 Number of shares of 
 common stock 
outstanding
Earnings available for 
5. Return on total
common stockholders 
assets (ROA) ( = =


Total assets 

6. Return on 
Earnings available for
common equity 
common stockholders
(ROE) ( = =
 
Common stock equity
 
 BARLETT LLC, 

2013 2012

Gross profit $986 $856

= = 32.1% = 33.3%
margin $3,074 $2,567

Operating profit $418 $303

= = 13.6% = 11.8%
margin $3,074 $2,567

$221 $138
Net profit margin = = 7.2% = 5.4%
$3,074 $2,567
 BARLETT LLC, 

2013 2012
Earnings per share (EPS) $221 $138
( = $76.26 = 2.9 $76.26 = 1.8

Return on total assets $221 $138
(ROA) ( = $3,597 = 6.1% $3,270 = 4.2%

Return on common
$221
equity (ROE) ( $138
= = 12.6% $1,620 = 8.5%

$1,754

 



.

.
 

.
:
(price/earningsratio)

(market/book ratio) .


-
.

.

.

.
M arket price per 
share of common 
1. Price/earnings
= stock =
(P/E) ratio
Earnings per share 




.

.
1- .

M arket price per 

share of common 
2. M arket/book stock 
= =
(M /B) ratio Book value per share 
of common stock 

 BARLETT LLC
P/E ratio, M /B ratio
2013 2012

Price/earnings (P/E) $32.25 $18.06

= = 11.1 = 10.0
ratio $ 2.90 $1.81

M arket/book (M /B) $32.25 18.06

= = 1.4 = 0.8
ratio $23.00 $23.00
 BARLETT LLC

Evaluation
I ndustry
Year Cross- Time-
Ratio Average Overa
Sectional Series
ll
2011 2012 2013 2013 2013 2011-2013
Liquidity Ratios
Current ratio 2.04 2.08 1.97 2.05 OK OK OK
Quick (acid-test) ratio 1.32 1.46 1.51 1.43 OK Good Good
Activity Ratios
I nventory turnover 5.1 5.7 7.2 6.6 Good Good Good
Average collection period 43.9 51.2 59.7 44.3 Poor Poor Poor
Average payment period 75.8 81.2 95.4 66.5 Poor Poor Poor
Total assets turnover 0.94 0.79 0.85 0.75 OK OK OK
Debt Ratios
Debt ratio 36.80% 44.30% 45.70% 40.00% OK OK OK
Times interest earned 5.6 3.3 4.5 4.3 Good OK OK
ratio
Fixed-payment coverage 2.4 1.4 1.9 1.5 Good OK Good
ratio
 BARLETT LLC

Evaluation
I ndustry
Year Cross- Time-
Average
Ratio Sectional Series
Overall
2011-
2011 2012 2013 2013 2013
2013
Profitability Ratios
Gross profit margin 31.40% 33.30% 32.10% 30.00% OK OK OK
Operating profit margin 14.60% 11.80% 13.60% 11.00% Good OK Good
Net profit margin 8.20% 5.40% 7.20% 6.20% Good OK Good
Earnings per share (EPS) $3.26 $1.81 $2.90 $2.26 Good OK Good
Return on total assets 7.80% 4.20% 6.10% 4.60% Good OK Good
(ROA)
Return on common equity 13.70% 8.50% 12.60% 8.50% Good OK Good
(ROE)
M arket Ratios
Price/earnings (P/E) 10.5 10 11.1 12.5 OK OK OK
ratioe
M arket/book (M /B) ratioe 1.25 0.85 1.4 1.3 OK OK OK
eThe market price per share at the end of 2011 was $18.06.
(DU PONT) 

(Du Pont formula)
(M odified Du
Pont formula)


.

2
.
9 (ROA)
9 (ROE)
 DU PONT ANALYSI S

Net income
Profit margin
Sales Return on
assets
Asset
turnover Return on
Total assets = Equity
Total assets
(Equity
multiplier)
Equity
 (DU PONT)

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.
9


9 2
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(DU PONT)

Net Profit Total Asset

X
ROA = M argin Turnover

Net I ncome Sales

ROA = X
Sales Total Asset

Net I ncome
ROA =
Total Asset

Net I ncome
ROE =
Total Equity
(DU
PONT M ODI FI ED/EXTENTI ON M ODEL)
2
9
(ROE)- .
9 ROE=ROA x FLM
9 ROE=NPM x TAT x FLM
9 FLM -Financial leverage multiplier
Net I ncome Sales Total Asset
ROE = X X
Sales Total Asset Common Equity

Net Profit Total Asset Financial leverage

ROE = X X
M argin Turnover multiplier
(DU
PONT M ODI FI ED/EXTENTI ON M ODEL)
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