The DuPont Analysis: The DuPont analysis also called the DuPont model is a financial ratio based on the return on equity ratio that is used to analyse a company’s ability to increase its return on equity. In other words, this model breaks down the return on equity ratio to explain how companies can increase their return for investors. The DuPont analysis looks at three main components of the ROE ratio, that is, Profit Margin, Total Assets Turnover and the Financial Leverage. This analysis is given by
2018: Net Profit/Sales x Sales/Total Assets x Total Assets/Total Equity
= 7 882 870/53 555 405 xx
2017: Net Profit/Sales x Sales/Total Assets x Total Assets/Total Equity
= 1 416 608/45 122 963 xx
ABRIDGED company was better at increasing their return for investor in 2018 compared to 2017. Overall, according to the profitability ratio analysis, ABRIDGED Company performed better in the 2018 rather than in 2017. Profit margins are higher in 2018 and we can conclude that in
2018 the company was more investor friendly than in 2017. However, the ratios are only different with smaller margins. This means that inasmuch as the company performed better in 2018, it still has along road to improve from the 2017 ratios
Current Ratio: It measures the company’s ability to pay short-term liabilities such as payable accounts and short-term loans, which represents the ratio of current assets to current liabilities.
Current assets Current liabilities
Details
2016
2017
2018
Current assets
$27,168,168
$19,716,960
$28,083,112 Current liabilities
$33,044,267
$30,356,078
$32,789,311
Current ratio
0.82217
0.6495
0.85647
Table 1.2
Analysis
BNC attained high liquidity in 2016 and 2018 respectively. With no significant change in current liabilities, BNC’s current assets decreased significantly in 2017 by 27.43% thereby negatively affecting the current ratio.
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