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      Question

      DuPont analysis is:

      A an approach that is used to analyze Return on Assets (ROA) Correct Answer Incorrect Answer
      B an approach that is used to analyze Return on capital employed (ROCE) Correct Answer Incorrect Answer
      C an approach that is used to analyze Return on equity (ROE) Correct Answer Incorrect Answer
      D an approach that is used to analyze Return on investments (ROI) Correct Answer Incorrect Answer

      Solution

      DuPont analysis is an approach to study the return on equity of a firm by analyzing the three main components of profitability, efficiency and solvency by using the ratios net profit margin * assets turnover * equity multiplier (financial leverage multiplier) As per DuPont analysis, ROE = net profit margin * assets turnover * equity multiplier.

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