The Dupont method of profitability analysis is
A) TA - CL / operating income
B) ROI × WACC
C) [revenue / investment] × [income / revenue]
D) ROI / WACC
E) ROI × RI

Question

Quizplus · Accepted Answer

The Dupont method of profitability analysis involves breaking down the return on investment into two components: profitability (measured by profit margin) and efficiency (measured by asset turnover). The formula for the Dupont method is [revenue / investment] × [income / revenue]. This formula takes into account both the income generated from the assets (profit margin) and the efficiency at which the assets are used (asset turnover). None of the other answer choices accurately represent the Dupont method.

The Dupont Method of Profitability Analysis Is