The ________ method of profitability analysis recognizes the two basic ingredients in profit-making: increasing income per dollar of revenues and using assets to generate more revenues.
A)Balanced Scorecard
B)Residual-Income
C)Dupont
D)Economic Value Added

Question

Quizplus · Accepted Answer

The Dupont method of profitability analysis recognizes the two basic ingredients in profit-making, which are increasing income per dollar of revenues and using assets to generate more revenues. The method breaks down the return on equity (ROE) into three components: net profit margin, total asset turnover, and financial leverage. This approach helps managers identify areas where they can improve operations to increase profitability. The other options listed (Balanced Scorecard, Residual-Income, and Economic Value Added) are other methods of performance measurement but do not specifically focus on the two basic ingredients of profit-making.

The ________ Method of Profitability Analysis Recognizes the Two Basic