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b. Has Joshua & White's ability to manage its assets improved or worsened? Explain.
All asset management ration were close to the industry averages initially (although the DSO was a
little better than the industry average. However, all ratios worsened, with the inventory turnover
showing the biggest change, which again indicates a buildup in inventory.
c. How has Joshua & White's profitability changed during the last year?
All profit margins improved and are comparable to the industry averages.
d. Perform an extended Du Pont analysis for Joshua & White for 2008 and 2009.
ROE = PM x TA Turnover x Equity Multiplier
2012 16.35% 9.57% 1.11 1.54
2011 15.80% 8.63% 1.22 1.50
ROE improved because the profit margin improved and the equity multiplier increases, despite the
reduction in the total asset turnover ratio. Thus, J&W became more profitable, more leveraged, but
less efficient.