Analyzing Magang Financial Statements_2010.pdf

11 Magang Financial Statement Analysis Suggested Answers 2 Du Pont Analysis 23 The Du Pont Framework 2.602.752.662.50Leverage 1.391.040.990.77Assets turnover 1.45%1.03%0.98%1.03%Profit margin 4.47%2.93%3.61%1.99%ROE 2008Industry2008Magang2009 Industry2009 MagangRatio The industry data are the medians of the industry 4 Du Pont Analysis: ROE Magang, 1.99% Magang, 2.93% Industry, 3.61% Industry, 4.47% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% Year 2009 Year 2008 Magang’s ROEs in both years were below the industry’s, suggesting the lower ability of Magang in earning profits for shareholders. From 2008 to 2009, both Magang’s and industry’s ROEs dropped reflecting difficulties in overall economic climate. Relatively, Magang’s decline was more than the industry. Magang’s ROEs in both years were below the industry’s, suggesting the lower ability of Magang in earning profits for shareholders. From 2008 to 2009, both Magang’s and industry’s ROEs dropped reflecting difficulties in overall economic climate. Relatively, Magang’s decline was more than the industry. 35 Du Pont Analysis: Profit Margin Magang, 1.03% Magang, 1.03%Industry, 0.98% Industry, 1.45% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% Year 2009 Year 2008 Although the profit margins of the industry declined significantly from 2008 to 2009, Magang held steady, resulting in a slightly better profit margin than the industry in 2009. Even though Magang’s ROE was lower, its higher profit margin reflects Magang’s ability in earning profits from operating activities. Although the profit margins of the industry declined significantly from 2008 to 2009, Magang held steady, resulting in a slightly better profit margin than the industry in 2009. Even though Magang’s ROE was lower, its higher profit margin reflects Magang’s ability in earning profits from operating activities. 6 Du Pont Analysis: Assets Turnover Magang, 0.77 Magang, 1.04Industry, 0.99 Industry, 1.39 0 0.2 0.4