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 Company A Company B Company C ROE 12.0% 15.5% / Sales 21.5% X Total Assets Turnover X 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: X / Total Assets X Total Assets / Total Common Equity 57.3% 58.2% 58.0% Profit Margin X Total Assets Turnover X Equity Multiplier 9.8 10.2 10.3 2.14 2.61 3.60 Referring to these data, which of the following conclusions will be true about the companies' ROES? O The main driver of Company C's superior ROE, as compared with that of Company A's and Company B's ROE, is its operational efficiency. The main driver of Company C's superior ROE, as compared with 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 with that of Company A's and Company B's ROE, is its greater use of debt financing.

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: 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 inceme 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 develep 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: Referring to these data, which of the following conclusions will be true about the companies' Rof s? The main driver of Company C's superior ROE, as compared with that of Company A's and Company Bs ROE, is its operabonal efficiency. The main driver of Company Cs superior ROE, as compared with that of Company As and Company Bs ROE, is its efricient use of assets The main driver of Company Cis superier RoE, as Compared with that of Company As and Company Bs ROE, is its greater use of debt financing