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DuPont analysis is an expression which breaks _______ into three parts.1. Gross Profit2. Return on Equity (ROE)3. Net Profit4. Current Asset

Answer» Correct Answer - Option 2 : Return on Equity (ROE)

The correct answer is Return on Equity (ROE).

  • The DuPont equation is an expression that breaks return on equity down into three parts:
    • profit margin
    • asset turnover
    • leverage
  • By splitting ROE into three parts, companies can more easily understand changes in their returns on equity over time.
  • As profit margin increases, every sale will bring more money to a company’s bottom line, resulting in a higher overall return on equity.
  • As asset turnover increases, a company will generate more sales per asset owned, resulting in a higher overall return on equity.


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