Paper 2: Assignment Financing: Dow DuPont Organisation|FINANCIAL ANALYSIS
The company Dow DuPont Company is one of the American company which formed merger of DuPont and the Dow Chemical August 31st, 2017. The company has become the global chemical firm about sales; the company even split into three publicly traded company which were so diverse, material science, agriculture, and special products. The division of agriculture is called the Corteva Agriscience, the division of material science is called Dow the DuPont is the specialty product. Below is the company income statements (Verdecchia et al., 2017).
Dow DuPont Inc., Income Statement
Dec-17
Dec-16
Dec-15
Dec-14
Dec-13
Net Sales
63484
53458
53500
48778
58080
Costs of Sales
50414
37500
37500
45685
47464
Gross Margin
13070
15958
16000
3093
10616
R&D Expenditures
-2100
-1208
-1100
-1178
-1850
selling and general administrative
-4000
-3300
-3210
-3546
-2157
Amortization of intangibles
-1013
-545
-400
-425
-1685
Restructuring, Goodwill impairment and assets charges
-3280
-500
525
-578
-458
Integration and separation costs
-1100
-1103
-975
-845
1758
Asbestos-related charge
-524
-548
-689
Total
-11493
-7180
-5708
-7261
-4392
Operating Income
1577
8778
10292
-4168
6224
Sundry Income, net
756
258
1250
1571
1252
Interest expense and amortization of debt discount
958
125
548
468
458
Income From Continuing operations before Income
1714
383
1798
2039
1710
Loss from discount operations, net of tax
-77
-85
-64
-784
-84
Net Income
1637
298
1734
1255
1626
Net Income to no controlling
-132
-85
-89
-76
-33
Net income attributable Dow DuPont Inc.
1505
213
1645
1179
1593
Preferred Stock Divided
-345
-345
-345
-345
-345
Net Income
1160
-132
1300
834
1248
the gross margin for the past five years indicates that the company has been performing very well since after all the expenses have been deducted 2017 had the net income of 1160 which was a significant improvement from 2016. 2015 was the year that the firm had a lot of expenses which made the company have a net loss of -132 (Verdecchia et al., 2017).
The following financial ratios are essential to illustrate the financial position of the company, starting with the higher the liquidity ratios indicate that the company liquid asset can cover the company’s liability, therefore, the higher the ratio of the company liquidity the better the firm can cover the liabilities. The table below illustrates the current ratio for the company for over five years; the liquidity ratio is above 1.9 to 2.8 which is very high for the company meaning that current assets can cover the liabilities. The quick ratios above indicate that the current company assets are measuring how the current assets are measuring the liabilities (Verdecchia et al., 2017).
Dow DuPont Inc., liquidity ratios
31-Dec-17
31-Dec-16
31-Dec-15
31-Dec-14
31-Dec-13
Current ratio
1.9
1.87
2.17
2.08
2.08
Quick ratio
1.3
1.23
1.45
1.2
1.2
Cash ratio
0.56
0.53
0.77
0.5
0.49
The table below shows how the current ratio of the company relates to that of the competitors in the company, from the current ratio analysis of competitors are; LyondellBasell Industries N.V has the highest, had the highest current ratios ranging from 2.13 to 2.56 which is the best level in the industry. While Praxair Inc. has the lowest level of quick ratio ranging from 0.96 to 1.16 while Dow DuPont has the average level (Verdecchia et al., 2017).
Dow DuPont Inc., Current Ratio
31-Dec-17
31-Dec-16
31-Dec-15
31-Dec-14
31-Dec-13
Selected Financial Data (USD $ in millions)
Current assets
49,879
23,723
24,586
24,356
24,866
Current liabilities
26,229
12,635
11,225
11,692
11,987
Ratio
Current ratio
1.99
1.87
2.09
2.07
2.07
Benchmarks
Current Ratio, Competitors
LyondellBasell Industries N.V.
2.44
2.13
2.25
2.17
2.56
Praxair Inc.
0.96
1.16
1.28
1.11
1.08
Current Ratio, Sector
Chemicals
1.9
1.86
2.22
1.8
2.2
The trend for the Dow DuPont company is illustrated in the table below, indicating the profitability, rate of tax, the asset turnover, Net Margin %, Return on Assets % ranging from 5.36, in 2016 to 10.76 in 2017. The financial leverage of 3.18 in 2017 to 1.92. ROE percent, with the ratio of 36.7 in 2015 to 2.29 (Epstein, 2018).
Dow DuPont Inc. Trends in the financial ratios
Profitability
2015-12
2016-12
2017-12
TTM
Tax Rate %
21.56
0.2
Net Margin %
14.85
8.22
2.43
2.43
Asset Turnover (Average)
0.72
0.64
0.45
0.45
Return on Assets %
10.76
5.36
1.08
1.08
Financial Leverage (Average)
3.18
3.17
1.92
1.92
ROE %
36.75
16.72
2.29
2.29
ROI fund %
20.77
11.95
2.22
2.22
Coverage interest
12.5
6.12
2.2
2.2
References
Epstein, M. J. (2018). Making sustainability work: Best practices in managing and measuring corporate social, environmental and economic impacts. Routledge.
Verdecchia, A., Harrington, R. M., & Kirkpatrick, J. D. (2017, December). Source parameters of the 1999 Osa peninsula (Costa Rica) earthquake sequence from spectral ratios analysis. In AGU Fall Meeting Abstracts.