The DuPont equation shows the relationships among asset management, debt management, and ratios. Management can use the DuPont equation to analyze ways of improving the firm's performance. Its equation is:
Ratio analysis is important to understand and interpret financial statements; however, sound financial analysis involves more than just calculating and interpreting numbers. factors also need to be considered.

Quantitative Problem: Rosnan Industries' 2018 and 2017 balance sheets and income statements are shown below.

Balance Sheets:
2018 2017
Cash and equivalents $60 $45
Accounts receivable 275 300
Inventories 375 350
Total current assets $710 $695
Net plant and equipment 2,000 1,490
Total assets $2,710 $2,185
Accounts payable $150 $85
Accruals 75 50
Notes payable 110 135
Total current liabilities $335 $270
Long-term debt 450 290
Common stock 1,225 1,225
Retained earnings 700 400
Total liabilities and equity $2,710 $2,185
Income Statements:
2018 2017
Sales $2,000 $1,500
Operating costs excluding depreciation 1,250 1,000
EBITDA $750 $500
Depreciation and amortization 100 75
EBIT $650 $425
Interest 62 45
EBT $588 $380
Taxes (40%) 235 152
Net income $353 $228
Dividends paid $53 $48
Addition to retained earnings $300 $180
Shares outstanding 100 100
Price $25.00 $22.50
WACC 10.00%

What is the firm’s 2018 current ratio?

What is the firm’s 2018 net profit margin?

What is the firm’s 2018 price/earnings ratio?