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. Total Assets / Total Common Equity Net Income / Sales Price per Share / Earnings per Share

Answer 1

Total Assets / Total Common Equity

Step-by-step explanation:

Depend upon theDu Pont Equation,

The following formula should be used

ROE = Net profit margin × Total asset turnover × Equity multiplier

And,

ROE = (Net profit ÷ Sales) × (Sales ÷ Total Assets) × (Assets ÷ Equity)

So as per the above formula, the above answer should be considered