Question

A DuPont analysis is conducted using the DuPont equation, which helps to identify and analyze three important factors that drive a company’s ROE. According to the equation, which of the following factors directly affect a company’s ROE? Check all that apply.
A. Net income / Sales
B. Sales / Total asset
C. Total asset / Total company equity.

Answer 1

Answer:

• A. Net income / Sales
• B. Sales / Total asset
• C. Total asset / Total company equity.

Explanation:

• The Du Pont analysis is a DuPont identity, equation, and a model and this breaks of the ROI as into three parts by using the formula as profit margin that is net profit/sales. Its multiplied by the sales or the average total assets into total companies equity and thus measures the profit and asset margins and the financial leverages.