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

Question

Quizplus · Accepted Answer

According to the DuPont system, the return on equity is equal to (return on total assets) × (financial leverage multiplier). Choice C is the only option that includes this formula. The other options include different components that are not relevant to the DuPont system's formula for return on equity.

In the DuPont System, the Return on Equity Is Equal