Question

An advantage of the DuPont model for calculating ROI is that?

1) it uses average assets and the straightforward ROI formula does not.
2) it is easier to use than the straightforward ROI formula.
3) it focuses on asset utilization as well as net income.
4) it uses average stockholders' equity.

Answer 1

The advantage of the DuPont model for calculating ROI is that it considers both asset utilization and net income, while the straightforward ROI formula only focuses on net income.

Step-by-step explanation:

An advantage of the DuPont model for calculating ROI is that it focuses on asset utilization as well as net income. The straightforward ROI formula only considers net income, while the DuPont model takes into account both the efficiency of using assets and the profitability of the business. By examining both factors, the DuPont model provides a more comprehensive evaluation of a company's performance and helps identify areas for improvement.