DuPont Ratio Analysis Case Study

DuPont Ratio Analysis
DuPont Ratio Analysis

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DuPont Ratio Analysis


Case Studies in Finance Edition: 7 Authors: Robert F . Bruner, Kenneth Eades, & M ichael Schill ISBN: 9780077861711

Week 4 reading:

In this week, you need to finish the reading of case 8:

  1. Case 8: Krispy Kreme Doughnuts

Summary of case 8:

This case considers the sudden and very large drop in the market value of equity for Krispy Kreme Doughnuts, Inc., associated with a series of announcements made in 2004. Those announcements caused investors to revise their expectations about the future growth of Krispy Kreme, which had been one of the most rapidly growing American corporations in the new millennium. Your task is to evaluate the implications of those announcements and to assess the financial health of the company. This case is intended to be introductory: it can provide a first exercise in financial statement analysis and lay the foundation for two important financial themes: the concept of financial health, and the financial-economic definition of value and its determinant

Main skills to develop: DuPont Ratio Analysis:

Please see:

Key points in case 8:

  • Growth: Case Exhibit 1,
  • The company showed a net loss in the first quarter of 2005. Growth has occurred in accounts receivables from affiliates and from reacquired franchise rights, the very item that was the focus of the startling revelations in the Wall Street Journal in May 2004, which described the alleged “aggressive accounting treatment,” whereby the company did not amortize the value of these intangible assets.[1] 
  • Liquidity, leverage, and profitability:
  • Peer Comparisons:

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