TuPont Corp

question 28

Essay

TuPont Corp.has net income of $1.95 million, an effective tax rate of 35 percent, interest expense of $400,000, an asset turnover of 2.0, and $14 million in total assets, of which $7 million is debt.Use the DuPont system to calculate its ROE, decomposed into leverage ratio, asset turnover, profit margin, and debt burden.

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Definitions:

Note Payable

A written promise to pay a specific amount of money, often bearing interest, at a future date or on demand.

Liquidated

The process of closing a business by selling off assets to pay creditors and distributing any remaining assets to the owners or shareholders.

Involuntary Bankruptcy

A legal process initiated by creditors seeking to collect debts from a company or individual that cannot pay its obligations.

Petition Filed

The act of formally submitting a document to a court or official body requesting a legal action or judgment.