Answer :
Sure, let's address each question step-by-step in detail:
### 5.1 Asset Efficiency (Return on Assets) for 2012
The return on assets (ROA) measures how efficiently a company can manage its assets to produce profits. It is calculated as:
[tex]\[ \text{Return on Assets} = \frac{\text{Net Profit}}{\text{Total Assets}} \][/tex]
For 2012:
[tex]\[ \text{Net Profit}_{2012} = R1,743 \, \text{m} \][/tex]
[tex]\[ \text{Total Assets}_{2012} = R9,256 \, \text{m} \][/tex]
Thus,
[tex]\[ \text{Return on Assets}_{2012} = \frac{1,743}{9,256} \approx 0.1883 \text{ or } 18.83\% \][/tex]
### 5.2 Comment on the Movement in Asset Efficiency
For 2011, the return on assets was given as 1.16 times (116%).
Comparing the two years:
[tex]\[ \text{Change in ROA} = \text{ROA}_{2012} - \text{ROA}_{2011} = 0.1883 - 1.16 = -0.9717 \text{ or } -97.17\% \][/tex]
#### Reasons for Change:
1. Decline in Efficiency:
- The significant decrease in ROA from 116% to 18.83% indicates a decline in the efficiency of utilizing assets to generate profit.
2. Variation in Net Profit and Assets:
- This drastic change can be attributed to variations in net profit or total assets between the two years. If the total assets increased significantly without a corresponding rise in net profit, or if net profit declined, the ROA would be negatively affected.
### 5.3 Calculate the Profitability (Net Margin) for 2012
The net margin indicates the percentage of profit a company makes for every dollar of sales. It is calculated as:
[tex]\[ \text{Net Margin} = \left( \frac{\text{Net Profit}}{\text{Sales}} \right) \times 100 \][/tex]
For 2012:
[tex]\[ \text{Sales}_{2012} = R10,937 \, \text{m} \][/tex]
[tex]\[ \text{Net Profit}_{2012} = R1,743 \, \text{m} \][/tex]
Thus,
[tex]\[ \text{Net Margin}_{2012} = \left( \frac{1,743}{10,937} \right) \times 100 \approx 15.94\% \][/tex]
### 5.4 Comment on the Movement in Net Margin
For 2011, the net margin was given as 15.2%.
Comparing the two years:
[tex]\[ \text{Change in Net Margin} = \text{Net Margin}_{2012} - \text{Net Margin}_{2011} = 15.94\% - 15.2\% = 0.74\% \][/tex]
#### Reasons for Change:
1. Slight Improvement:
- The net margin increased slightly by 0.74%, indicating a modest improvement in profitability.
2. Variations in Sales and Net Profit:
- The shift in net margin may result from changes in net profit or sales figures. If the net profit grew at a faster rate than sales, it would lead to a higher net margin and vice versa.
### 5.5 Significance of Du Pont Analysis
The Du Pont Analysis is a powerful tool used to decompose the return on equity (ROE) into three major components: profitability, efficiency, and leverage. Understanding each component's contribution allows more insight into the factors driving financial performance.
1. Profitability:
- This is reflected in the net profit margin, showing how much profit a company generates from its sales.
2. Efficiency:
- Measured by asset turnover, showing how effectively a company uses its assets to generate sales.
3. Leverage:
- Represented by the equity multiplier, indicating the degree to which a company is financing its operations with debt versus equity.
By breaking down ROE into these components, the Du Pont Analysis provides a clearer picture of what is contributing to a company's financial performance and highlights areas where management might focus to improve overall profitability.
### 5.1 Asset Efficiency (Return on Assets) for 2012
The return on assets (ROA) measures how efficiently a company can manage its assets to produce profits. It is calculated as:
[tex]\[ \text{Return on Assets} = \frac{\text{Net Profit}}{\text{Total Assets}} \][/tex]
For 2012:
[tex]\[ \text{Net Profit}_{2012} = R1,743 \, \text{m} \][/tex]
[tex]\[ \text{Total Assets}_{2012} = R9,256 \, \text{m} \][/tex]
Thus,
[tex]\[ \text{Return on Assets}_{2012} = \frac{1,743}{9,256} \approx 0.1883 \text{ or } 18.83\% \][/tex]
### 5.2 Comment on the Movement in Asset Efficiency
For 2011, the return on assets was given as 1.16 times (116%).
Comparing the two years:
[tex]\[ \text{Change in ROA} = \text{ROA}_{2012} - \text{ROA}_{2011} = 0.1883 - 1.16 = -0.9717 \text{ or } -97.17\% \][/tex]
#### Reasons for Change:
1. Decline in Efficiency:
- The significant decrease in ROA from 116% to 18.83% indicates a decline in the efficiency of utilizing assets to generate profit.
2. Variation in Net Profit and Assets:
- This drastic change can be attributed to variations in net profit or total assets between the two years. If the total assets increased significantly without a corresponding rise in net profit, or if net profit declined, the ROA would be negatively affected.
### 5.3 Calculate the Profitability (Net Margin) for 2012
The net margin indicates the percentage of profit a company makes for every dollar of sales. It is calculated as:
[tex]\[ \text{Net Margin} = \left( \frac{\text{Net Profit}}{\text{Sales}} \right) \times 100 \][/tex]
For 2012:
[tex]\[ \text{Sales}_{2012} = R10,937 \, \text{m} \][/tex]
[tex]\[ \text{Net Profit}_{2012} = R1,743 \, \text{m} \][/tex]
Thus,
[tex]\[ \text{Net Margin}_{2012} = \left( \frac{1,743}{10,937} \right) \times 100 \approx 15.94\% \][/tex]
### 5.4 Comment on the Movement in Net Margin
For 2011, the net margin was given as 15.2%.
Comparing the two years:
[tex]\[ \text{Change in Net Margin} = \text{Net Margin}_{2012} - \text{Net Margin}_{2011} = 15.94\% - 15.2\% = 0.74\% \][/tex]
#### Reasons for Change:
1. Slight Improvement:
- The net margin increased slightly by 0.74%, indicating a modest improvement in profitability.
2. Variations in Sales and Net Profit:
- The shift in net margin may result from changes in net profit or sales figures. If the net profit grew at a faster rate than sales, it would lead to a higher net margin and vice versa.
### 5.5 Significance of Du Pont Analysis
The Du Pont Analysis is a powerful tool used to decompose the return on equity (ROE) into three major components: profitability, efficiency, and leverage. Understanding each component's contribution allows more insight into the factors driving financial performance.
1. Profitability:
- This is reflected in the net profit margin, showing how much profit a company generates from its sales.
2. Efficiency:
- Measured by asset turnover, showing how effectively a company uses its assets to generate sales.
3. Leverage:
- Represented by the equity multiplier, indicating the degree to which a company is financing its operations with debt versus equity.
By breaking down ROE into these components, the Du Pont Analysis provides a clearer picture of what is contributing to a company's financial performance and highlights areas where management might focus to improve overall profitability.
