Final answer:
The component of the DuPont framework indicating how much money was borrowed to purchase assets is the equity multiplier. It is calculated by dividing total assets by shareholders' equity and shows the extent of financing through debt. A higher equity multiplier suggests more debt financing.
Step-by-step explanation:
The component of the DuPont framework that indicates how much money was borrowed to purchase assets is the equity multiplier. The equity multiplier is part of the DuPont analysis, a financial ratio based on return on equity that evaluates a company's ability to increase its return on equity through higher sales, lower costs, more efficient use of assets, or more borrowed funds. It is calculated by dividing total assets by total shareholders' equity and reflects how much of the assets were financed by debt. A higher equity multiplier means there is more debt financing.
In the given financial information, the assets include reserves (30), bonds (50), and loans (50), while the liabilities include deposits (300) and equity (30). The equity multiplier in this scenario would be calculated as the total assets (130) divided by the total equity (30), resulting in an equity multiplier of 4.33, indicating that for every unit of equity, there are 4.33 units of assets financed, implying a higher degree of financial leverage.