If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the net profit margin the total asset turnover ratio, and the equity multiplier And, according into the company's management of its sales and share price effectiveness in using the company's assets, and Now, let's see your notes with your ratios, and then we can talk about possible strategies that will improve the ratios. I'm going to check the box to the side of your calculated value if your calculation is correct and leave it unchecked if your calculation. Madison OK, it looks like I've got a couple of incorrect values, so show me your calculations, and then we can talk strategies for improvement. You 've just made rough calculations, so let me complete this table by inputting the components of each ratio and its value: Cepeus Manufacturing Inc. DuPont Analysis Ratios Calculation Value Profitability ratios Numerator Denominator Gross profit margin Operating profit margin Net profit margin Return on equity Asset management ratio Total asset turnover Financing ratios Equity multiplier Madison see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment Xavier would have been very disappointed in me if I had showed him my original work. So, now let's switch topics and identify general strategies that could be used to positively affect Cepeus's ROE. You OK, so given your knowledge of the component ratios used in the DuPont equation, which of the following strategies should improve the company's ROE? (Check all that apply.) Increase the efficiency of its assets so that it generates more sales with each dollar of asset investment and increases the companys total asset turnover Reduce the company's operating expenses, its cost of goods sold, and/or the interest rate on its borrowed funds because this will increase the company's net profit margin. Use more debt financing in its capital structure and increase the equity multiplier. Decrease the company's use of debt capital because it will decrease the equity multiplier
