integrative exercise 1

Complete the following integrative exercise:

One of the most fundamental methods to examine firm performance is the DuPont approach illustrated in Equation 14.2 on page 452 of your text. However, a slightly simpler DuPont analysis can be done as follows. We start with ROE.

ROE = Net Profit/Equity

and then decompose it into three factors (rather than five as shown in the text).

ROE = (Net Profit/Sales)x(Sales/Assets)x(Assets/Equity)

Conduct a three factor DuPont analysis for Starbucks and Cheesecake Factory for 2015 and 2016 end-of-fiscal-year results. Use the information from financial statements provided in the section of the 2016 annual report titled: Item 8. Financial Statements and Supplementary Data. Use your analysis to provide a brief (1-2 paragraph) discussion of the change ROE from 2015 to 2016 for each firm and a comparison of the two firms in 2016.

 

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