Question

Question 2: DuPont method In year 2016, Apple Inc. had profit margin of 27.8% (i.e., it generated 27.8 cents of profit per dollar of sales) and asset turnover of 0.670 (i.e., it generated 67.0 cents of annual sales per dollar of assets). a) The profit margin indicates that Apple has low pricing power -- it cannot charge high prices relative to costs high production efficiency -- it has very low costs high pricing power -- it can charge high prices relative to costs The asset turnover indicates that Apple is extremely efficient in generating assets per dollar of sales extremely efficient in generating sales per dollar of assets relatively inefficient in generating sales per dollar of assets b) Compute Apple's return on investment (ROI) ROI

Answer 1

Answer and Explanation:

a. The profit margin represent that it could charge high prices that should be relative to the cost while on the other hand the asset turnover represent that it is relatively non-efficient for producing sales per asset dollar

b. Now the return on investment is

= Profit margin × asset turnover

= 27.8% × 0.670

= 18.6

The same would be relevant