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7. DuPont equation Aa Aa E Corporate decision makers and analysts often use a particular technique, called a DuPont analysis, to better understand the factors

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7. DuPont equation Aa Aa E Corporate decision makers and analysts often use a particular technique, called a DuPont analysis, to better understand the factors that drive a company's financial performance, as reflected by its return on equity (ROE). By using the DuPont equation, which disaggregates the ROE into three components, analysts can see why a company's ROE may have changed for the better or worse, and identify particular company strengths and weaknesses The DuPont Equation A DuPont analysis is conducted using the DuPont equation, which helps to identify and analyze three important factors that drive a company's ROE. Complete the following equations, which are needed to conduct a DuPont analysis: ROE - Profit Margin * Total Assets Turnover X X Total Assets Total Common Equity Sales Total Assets Most investors and analysts in the financial community pay particular attention to a company's ROE. The ROE can be calculated simply by dividing a firm's net income by the firm's shareholder's equity, and it can be subdivided into the key factors that drive the ROE. Investors and analysts focus on these drivers to develop a clearer picture of what is happening within a company. An analyst gathered the following data and calculated the various terms of the DuPont equation for three companies: Profit Margin x Total Assets Turnover x Equity Multiplier ROE Company A 12.0% Company B 15.5% Company C 21.5% 57.3% 58.29% 58.0% 10.2 10.3 2.14 2.61 3.60 polyut they have changed for the better or worse, and identity particular company eaknesses. The DuPont Equation Pont analysis is conducted using the DuPont equation, which helps to identify and analyze three important factors that drive a comp Complete the following equations, which are needed to conduct a DuPont analysis: ROE = Profit Margin X Total Assets Turnover X Equity Multiplier Return on Assets Retained Earnings Sales Total Assets investors and analysts in the financial community pay particular attention to a company's ROE. The ROE can be calculated simply by ding a firm's net income by the firm's shareholder's equity, and it can be subdivided into the key factors that drive the ROE. Investors a lysts focus on these drivers to develop a clearer picture of what is happening within a company. An analyst gathered the followina data The DuPont Equation is conducted using the DuPont equation, which helps to identify and analyze three important factors that drive following equations, which are needed to conduct a DuPont analysis: Profit Margin X Total Assets Turnover x Total Assets Total Common Equity Total Assets Gross Profit Net Income Net Sales The DuPont Equation Pont analysis is conducted using the DuPont equation, which helps to identify and analyze three important factors that drive a company's Complete the following equations, which are needed to conduct a DuPont analysis: ROE = Profit Margin X Total Assets Turnover x Total Assets Total Common Equity Sales Net Income Sales EBIT Most investors and analysts in the financial community pay particular attention to a company's ROE. The ROE can be calculated simply by dividing a firm's net income by the firm's shareholder's equity, and it can be subdivided into the key factors that drive the ROE. Investors and analysts focus on these drivers to develop a clearer picture of what is happening within a company. An analyst gathered the following data and calculated the various terms of the DuPont equation for three companies: ROE Company A 12.0% Company B 15.5% Company C 21.5% Profit Margin x Total Assets Turnover x Equity Multiplier 57.3% 9.8 2.14 58.2% 10.2 2.61 58.0% 10.3 3.60 Referring to these data, which of the following conclusions will be true about the companies' ROES? The main driver of company C's superior ROE, as compared to that of company A's and company B's ROE, is its greater use of debt financing The main driver of company Cs superior ROE, as compared to that of company A's and company B's ROE, is its efficient use of assets. The main driver of company C's superior ROE, as compared to that of company A's and company B's ROE, is its operational efficiency

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