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Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall
Edition 9ISBN: 0073527068Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall
Edition 9ISBN: 0073527068ROI analysis using DuPont model
a.Firm A has a margin of 12%, sales of $600,000, and ROI of 18%. Calculate the firm’s average total assets.
b. Firm B has net income of $78,000, turnover of 1.3, and average total assets of $950,000. Calculate the firm’s sales, margin, and ROI. Round your percentage answer to one decimal place.
c. Firm C has net income of $132,000, turnover of 2.1, and ROI of 7.37%. Calculate the firm’s margin. Round your percentage answer to one decimal place.
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Return on Investment (ROI):
Return on Investment is the return earned on the investment made. It is the term used in general to calculate the return from the financial statements. The return on investment is also known as return on assets. Return on investment is calculated using the following formula:
The DuPont Model:
DuPont Model is a model, which uses two ratios for the return on investment to be calculated. Margin and Assets turnover ratio are the two ratios to calculate the Return on Investment. Return on Investment under the DuPont model is calculated as shown below:
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