The DuPont identity can be accurately defined as:
A)Return on equity xTotal asset turnover xEquity multiplier.
B)Equity multiplier xReturn on assets.
C)Profit margin xReturn on equity.
D)Total asset turnover xProfit margin xDebt-equity ratio.
E)Equity multiplier xReturn on assets Profit margin.

Question

Quizplus · Accepted Answer

The DuPont identity is a formula that breaks down Return on Equity (ROE) into three components: Profit Margin, Total Asset Turnover, and Equity Multiplier. The correct expression is Equity Multiplier x Return on Assets, where Return on Assets is further broken down into Profit Margin x Total Asset Turnover.

The DuPont Identity Can Be Accurately Defined As