Give the DuPont model formula for computing (a) rate of return on total assets (ROA) and (b)

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Give the DuPont model formula for computing (a) rate of return on total assets (ROA) and (b) rate of return on common stockholders’ equity (ROE). Then answer these questions about the rate-of-return computations.

1. Explain the meaning of the component driver ratios in the computation of ROA.

2. What impact does the leverage ratio have on ROE?

3. Under what circumstances will ROE be higher than ROA? Under what circumstances would ROE be lower than ROA?

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Financial Accounting

ISBN: 978-0134725987

12th edition

Authors: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.

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Question Posted: Jun 18, 2019 11:10 AM

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Give the DuPont model formula for computing (a) rate of return on total assets (ROA) and (b)

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Req 1 The components of ROA are net profit margin ratio and asset turnover Net profit margin ratio n...View the full answer

Financial Accounting

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