As per DuPont system, ROE = net profit margin * total asset turnover * equity multiplier.

The ROE could also simply be calculated as (net income / total assets).

However, the DuPont system breaks up the ROE into three drivers of ROE. Thus, the effect of each driver on the ROE can be analyzed.

Similarly, ROA can be calculated as net profit margin * total asset turnover. These are the first two drivers from the DuPont equation.

Question: Based on your formulas, the equity multiplier would be the difference. What is it and why do we look at it? Explain.