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Abellano Fria Mae A - Prelim Exam Macctngprei01

1. Biogen's net profit margin and return on assets increased over the five-year period from 2011 to 2015, though ROA declined slightly from 2014 to 2015. Total asset turnover increased from 2011 to 2014 but then declined from 2014 to 2015. The overall trends indicate improving performance attributed to profit margins and asset efficiency, though leverage was stable and did not impact changes in return on assets. 2. Return on equity increased each year from 2011 to 2015. The increases were primarily due to rising return on assets until 2014, and increasing leverage from 2014 to 2015, as the equity multiplier rose significantly. Managerial decisions positively impacted returns through 2014 but performance declined slightly in 2015.

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70 views4 pages

Abellano Fria Mae A - Prelim Exam Macctngprei01

1. Biogen's net profit margin and return on assets increased over the five-year period from 2011 to 2015, though ROA declined slightly from 2014 to 2015. Total asset turnover increased from 2011 to 2014 but then declined from 2014 to 2015. The overall trends indicate improving performance attributed to profit margins and asset efficiency, though leverage was stable and did not impact changes in return on assets. 2. Return on equity increased each year from 2011 to 2015. The increases were primarily due to rising return on assets until 2014, and increasing leverage from 2014 to 2015, as the equity multiplier rose significantly. Managerial decisions positively impacted returns through 2014 but performance declined slightly in 2015.

Uploaded by

Nelia Abellano
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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REQUIREMENTS

1. Calculate Return on Assets (ROA) using the DuPont Analysis approach. Use the table below as a guide to develop your analysis.
Discuss and interpret the overall trend in each component of the computation and in ROA for the five-year period with an emphasis
on the 2014-2015 periods. Evaluate performance in terms of managerial decisions that impact the ROA.

DuPont Analysis ROA


Ratios 2015 2014 2013 2012 2011
Net Profit Margin 33% 30% 27% 25% 25%
Total Asset Turnover 0.64 0.74 0.63 0.58 0.59
Return on Assets 21% 22% 17% 14% 15%

2. Calculate Return on Equity (ROE) using the DuPont Analysis Approach. Use the table below as a gudie to develop your
analysis. Discuss and interpret the overall trends in the equity multiplier trend and in ROE for the five-year period with an
emphasis on the 2014-2015 periods. Evaluate performance in terms of managerial decisions that impact the ROE.

DuPont Analysis ROE


Ratios 2015 2014 2013 2012 2011
Return on Assets 21% 22% 16% 14% 15%
Equity Multiplier 1.7 1.3 1.4 1.4 1.4
Return on Equity 36% 30% 24% 20% 22%
Biogen’s net profit margin ratio has increased 8.3 percentage points over the five-year period. From 2011 to 2014
total asset turnover increased 0.15 points, but then declined 0.10 points from 2014 to 2015. Together, the resulting
ROA statistic has increased 6.4 percentage points over the five-year period. However, ROA has declined from 2014
to 2015.

ROA increased over the first four years and then fell from 22% to 21% in 2015.
Biogen’s equity multiplier remained fairly stable from 2011 to 2014. Then, from 2014 to 2015 it increased
significantly from 1.3 to 1.7. primarily resulting from strong ROA (until 2015). Further increases in ROE in
2015 were attributed to increasing leverage.
Overall, ROE has increased over the five-year period. During the first four years, the increase was attributed to
improving profit margins and improving asset efficiency. The use of leverage in the structure was stable and was not
a contributing factor to changes in ROE.
NET PROFIT MARGIN TOTAL ASSET TURNOVER RETURN ON ASSETS EQUITY MULTIPLIER

2011 2011 2011 2011


1266.6/5048.6 = 0.25 5048.6/8570.8 = 0.59 0.25 x 0.59 = 15% 8570.8/5938 = 1.44
2012 2012 2012 2012
1380.1/5516.5 = 0.25 5516.5/9589.85 = 0.58 0.25 x 0.58 = 14% 9589.85/6695.4 = 1.43
2013 2013 2013 2013
1862.3/6932.2 = 0.26 6932.2/10996.75 = 0.63 0.26 x 0.63 = 16% 10996.75/7791.9 = 1.41
2014 2014 2014 2014
2941.7/9703.3 = 0.30 9703.3/13089.05 = 0.74 0.30 x 0.74 = 22% 13089.05/9717.4 = 1.35
2015 2015 2015 2015
3593.2/10763.8 = 0.33 10763.8/16909.75 = 0.64 0.33 x 0.64 = 21% 16909.75/10094.45 = 1.7
RETURN ON EQUITY

2011
.15 x 1.44 = 0.22
2012
.14 x 1.43 = 0.20
2013
.16 x 1.41 = 0.23
2014
.22 x 1.35 = 0.30
2015
.21 x 1.7 = 0.36

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