The calculation for return on equity using Dupont Analysis is:
A) Profit margin x Asset turnover x Financial leverage
B) Profit margin x Asset turnover
C) Asset turnover x Financial leverage
D) Gross profit margin x Asset turnover x Financial leverage

Question

Quizplus · Accepted Answer

Dupont Analysis breaks down Return on Equity into three components: Profit Margin (Net Income/Revenue), Asset Turnover (Revenue/Assets), and Financial Leverage (Assets/Equity). The correct formula is Profit Margin x Asset Turnover x Financial Leverage.

The Calculation for Return on Equity Using Dupont Analysis Is