The Du Pont System shows which of the following series of relationships?
A)Net profit margin x total asset turnover = Return on investment.
B)Net profit margin x financial leverage = Return on equity.
C)Net profit margin x total asset turnover = Return on investment and Return on investment x financial leverage = Return on equity.
D)Net profit margin x total asset turnover = Return on equity and Return on equity x financial leverage = Return on investment.

Question

Quizplus · Accepted Answer

The Du Pont System shows the relationship between the net profit margin and total asset turnover in calculating the return on investment, and the relationship between return on investment and financial leverage in calculating the return on equity. Therefore, both of these equations are part of the Du Pont System and are represented by choice C.

The Du Pont System Shows Which of the Following Series