Calculating the Du Pont Identity Find the annual income statements and balance sheets for Dow Chemical (DOW) and Gateway (GTW). Calculate the Du Pont identity for each company for the most recent three years. Comment on the changes in each component of the Du Pont identity for each company over this period and compare the components between the two companies. Are the results what you expected? Why or why not?
Ratio Analysis Find and download the "Profitability" spreadsheet for Southwest Airlines (LUV) and Continental Airlines (CAL). Find the ROA (Net ROA), ROE (Net ROE), PE ratio (P/E-high and P/E-low), and the market-to-book ratio (Price/Book-high and Price/Book-low) for each company. Because stock prices change daily, PE and market-to-book ratios are often reported as the highest and lowest values over the year, as is done in this instance. Look at these ratios for both companies over the past five years. Do you notice any trends in these ratios? Which company appears to be operating at a more efficient level based on these four ratios? If you were going to invest in an airline, which one (if either) of these companies would you choose based on this information? Why?
Sustainable Growth Rate Use the annual income statements and balance sheets under the "Excel Analytics" link to calculate the sustainable growth rate for Coca-Cola (KO) each year for the past four years. Is the sustainable growth rate the same for every year? What are possible reasons the sustainable growth rate may vary from year to year?
External Funds Needed Look up Black & Decker (BDK). Under the "Financial Highlights" link you can find a five-year growth rate for sales. Using this growth rate and the most recent income statement and balance sheet, compute the external funds needed for BDK next year.
