Discuss how the Dow DuPont Company financed the initiative and why it was perceived to be advantageous. To answer this question, you might want to look at the following:

Running Head: FINANCIAL ANALYSIS

FINANCIAL ANALYSIS 6

Financial Analysis

Rufus Williams

Argosy University

July 26, 2018

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.

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