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      Question

      In ratio analysis, DuPont identity decomposes ROE

      into:
      A Profit margin × Asset turnover × Financial leverage (Equity multiplier) Correct Answer Incorrect Answer
      B Current ratio × Quick ratio × Debt ratio Correct Answer Incorrect Answer
      C Gross profit × Net profit × Operating profit Correct Answer Incorrect Answer
      D Inventory turnover × Receivables turnover × Payables turnover Correct Answer Incorrect Answer
      E ROA × Tax rate × Depreciation Correct Answer Incorrect Answer

      Solution

      DuPont decomposes ROE = (Net profit/Sales) × (Sales/Assets) × (Assets/Equity).

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