DuPont Analysis Last year,DJ's Soda Fountains,Inc.reported an ROE = 27 percent.The firm's debt ratio was 50 percent,sales were $9 million,and the capital intensity ratio was 1.5 times.What is the net income for DJ's last year?
A)$1.22m
B)$1.82m
C)$2.43m
D)$2.84m

Question

Quizplus · Accepted Answer

The DuPont formula is ROE = (Net Income/Sales) * (Sales/Assets) * (Assets/Equity). Given ROE = 27%, Debt Ratio = 50%, Sales = $9m, and Capital Intensity Ratio (Assets/Sales) = 1.5, we find Equity = Assets - Debt = 0.5 * Assets. Solving for Net Income gives $1.82m.

DuPont Analysis Last Year,DJ's Soda Fountains,Inc