In the extended DuPont equation, a firm's ROE reflects $(1)$ its use of debt financing, or leverage, as reflected by its $q,$

$(2)$ the efficiency with which it uses its assets, as measured by the $q,$

Z$,$ and $(3)$ its ability to generate sales and mani its production costs and operating expenses, as summarized by its $q,$

In contrast, in the traditional version of the equation, the firm's efficiency and profitability metrics are multiplied and summarized in a single measu the $-$ In this analysis, a company's financial performance is expected to result from both management's financing decisions and its effectiveness and efficiency in generating profits using the firm's asset base.