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In the extended DuPont equation, a firm's ROE reflects ( 1 ) its use of debt financing, or leverage, as reflected by its q ,
In the extended DuPont equation, a firm's ROE reflects its use of debt financing, or leverage, as reflected by its
the efficiency with which it uses its assets, as measured by the
Z and its ability to generate sales and mani its production costs and operating expenses, as summarized by its
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.
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