DuPont Analysis - APOLLO vs LONBISC

Below table shows how the Latest 5 Years ROE of APOLLO and LONBISC were achieved based on DuPont Analysis.

Year	2013	2012	2011	2010	2009
Net Profit Margin	14.40%	10.84%	10.13%	15.47%	11.93%
Sales Turnover	0.8692	0.8341	0.7541	0.7023	0.8328
Financial Leverage	1.1133	1.1177	1.1213	1.1180	1.1141
ROE	13.94%	10.11%	8.56%	12.15%	11.07%

Table 1: ROE for APOLLO

Year	2013	2012	2011	2010	2009
Net Profit Margin	5.20%	5.43%	6.92%	8.09%	9.29%
Sales Turnover	0.4244	0.4122	0.3857	0.4474	0.4116
Financial Leverage	1.8815	1.8570	2.0790	2.0077	2.0269
ROE	4.15%	4.16%	5.55%	7.26%	7.75%

Table 2: ROE for LONBISC

It is clear from the table above that APOLLO has achieved a much higher ROE of 13.94% compared to that of LONBISC of 4.15%. The higher ROE of APOLLO was achieved with a relatively high income margin of 14.4% compare to LONBISC – 5.20% and higher sales turnover (0.8692 vs 0.4244). Furthermore, APOLLO was using a lower financial leverage of just 1. 11 compare to 1.88 of LONBISC.

Figure 1: Trends of ROE of APOLLO and LONBISC

Based on the last 5 years results, the ROE for APOLLO is growing while LONBISC ROE is shrinking. And, the growing of APOLLO’s ROE was achieved with growing Net Profit Margin instead of other elements and this is the most desirable way to achieve a higher ROE. While, LONBISC’s net profit margin is experiencing a negative growth and this is the main contributor to the shrinkage of the ROE.

	A	B
Short-term loan	0	179,882
Long-term loan	0	48,848
Hire purchase creditors	0	10,823
Hire purchase	0	23,523
Total Debt	0	263,076

Table 3: Debt for APOLLO vs LONBISC

	A	B
Cash & Equivalents	64,863	27,210
Investment - Securities	0
Current Liabilities	134,436	241,617
Excess Cash	0	0

Table 4: Excess Cash for APOLLO vs LONBISC

Refer to the Table 3, APOLLO is a debt free company and it can increase the financial leverage and improves its ROE. However, financial leverage is a double edge sword it can hurt ROE badly in the bad times. And, high leverage can make a company’s balance sheet unhealthy and become risky during economy downturn.

From the above analysis, we can make a conclusion that APOLLO is much more efficient than LONBISC as APOLLO have a higher ROE for the pass 5 year which achieved by higher net profit margin, higher asset turnover and low financial leverage. Furthermore APOLLO has an option to further increase the ROE by using financial leverage.

References:-

• DuPont Analysis - Dissecting ROE