Using the Du Pont Identity Method, calculate return on equity given the following information. Profit margin 18%; total asset turnover 0.70; equity multiplier 1.1.
A) 12.16%
B) 13.86%
C) 14.16%
D) 15.86%
E) 16.16%

Question

Quizplus · Accepted Answer

The Du Pont Identity formula for return on equity (ROE) is: ROE = Profit Margin * Total Asset Turnover * Equity Multiplier. Substituting the given values: ROE = 18% * 0.70 * 1.1 = 0.1386 or 13.86%.

Using the Du Pont Identity Method, Calculate Return on Equity