In the DuPont system of analysis, the return on total assets (asset) is equal to ________.
A) (return on equity) × (financial leverage multiplier)
B) (return on equity) × (total asset turnover)
C) (net profit margin) × (fixed asset turnover)
D) (net profit margin) × (total asset turnover)

Question

Quizplus · Accepted Answer

In the DuPont system of analysis, the return on total assets (ROA) is equal to the net profit margin multiplied by the total asset turnover. The net profit margin measures the amount of profit generated for each dollar of sales, while the total asset turnover measures how efficiently a company uses its assets to generate revenue. Therefore, the correct formula is: ROA = (Net profit margin) x (Total asset turnover).

In the DuPont System of Analysis, the Return on Total