1

Du point analysis is conducted using DuPont equation which help you analyze three important

Answer:

Asset Turnover Ratio

Equity Multiplier

explanation:

DuPont analysis shows that ROE of the company  is affected by 3 things:

operating efficiency, it is measured by the  profit margin

financial leverage, it  is measured by equity multiplier.

asset use efficiency, it  is measured by the total asset turnover

so we could say that DuPont analysis is show mathematical form by the following calculation:

ROE

=  Asset Turnover Ratio x Equity Multiplier x Profit Margin .

2

Referring to these data  which of the following conclusion will be true about the company’s ROE

Answer: The main driver of company C’s superior ROE, as compared to that of company A’s and company B’s ROE, is its efficient use of assets.

explanation

In the company c we could show higher  equity multiplier .

It shows a financial leverage ratio .It  measures  amount of a company’s assets which are financed by the shareholders with comparing the  total assets with the  total shareholder’s equity.

equity multiplier is (%)  percentage of assets which are financed or owed by the shareholders.