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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