Question

"In the DuPont system of​ analysis, the return on equity is equal to"​ ________. A. ​(net profit​ margin) times ​(total asset​ turnover) B. ​(return on total​ assets) times ​(total asset​ turnover) C. ​(return on total​ assets) times ​(financial leverage​ multiplier) D. ​(stockholders' equity) times ​(financial leverage​ multiplier)

Answer 1

C. ​(return on total​ assets) times ​(financial leverage​ multiplier)

Step-by-step explanation:

The formula of return on equity using the DuPont system is presented below:

ROE = Profit margin × Total assets turnover × Equity multiplier

where,

Profit margin × Total asset turnover = Return on asset

The equity multiplier is

= Total assets ÷ shareholder equity

The total asset turnover equal to

= Sales ÷ Total assets

And, The profit margin equal to

= (Operating income ÷ sales) × 100