Question

Use the DuPont system and the following data to find return on equity...

A) Financial ratios
B) Business management strategies
C) Accounting principles
D) Investment opportunities

Answer 1

The DuPont system is a financial analysis method used to evaluate a company's performance and return on equity.

Step-by-step explanation:

The DuPont system is a financial analysis method used to evaluate a company's performance and return on equity (ROE). It analyzes three key financial ratios: profitability, efficiency, and leverage.

To calculate return on equity, you need the following financial ratios:

1. Net Profit Margin: Net Income / Total Revenue
2. Total Asset Turnover: Total Revenue / Average Total Assets
3. Equity Multiplier: Average Total Assets / Average Total Equity

Once you have these ratios, you can find the return on equity by multiplying them together: ROE = Net Profit Margin * Total Asset Turnover * Equity Multiplier.