The DuPont method decomposes return on equity into [blank].
A)return on assets and the debt ratio
B)return on assets and the equity multiplier
C)operating profit and inventory turnover
D)net profit margin and fixed asset turnover

Question

Quizplus · Accepted Answer

The DuPont method breaks down return on equity into two components: return on assets and equity multiplier. Return on assets measures the profitability of a company's assets, while the equity multiplier measures the extent to which a company uses debt to finance its operations. By breaking down return on equity into these two components, the DuPont method allows analysts to identify the key drivers of a company's return on equity and to evaluate whether changes in these drivers are having a positive or negative impact on the company's performance.

The DuPont Method Decomposes Return on Equity into [Blank]