The ________ method of profitability analysis recognises the two basic ingredients in profit-making: increasing profit per dollar of revenues and using assets to generate more revenues.
A)balanced scorecard
B)DuPont
C)residual-income
D)economic value added

Question

Quizplus · Accepted Answer

The DuPont method of profitability analysis breaks down return on equity (ROE) into three components: net profit margin, asset turnover, and financial leverage. This method recognizes that profitability is dependent on both increasing profit margins (i.e., increasing profit per dollar of revenues) and efficiently using assets to generate more revenues. The other options (A, C, and D) are also methods of profitability analysis, but they do not specifically recognize these two key ingredients in profit-making.

The ________ Method of Profitability Analysis Recognises the Two Basic