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The DuPont formula relates return on equity (= Net income/Stockholders equityt) to the company's net profit margin (= Net income/Sales), asset turnover (= Sales/Total assetst),
The DuPont formula relates return on equity (= Net income/Stockholders equityt) to the company's net profit margin (= Net income/Sales), asset turnover (= Sales/Total assetst), and equity multiplier (= Total assets/Stockholders equity). The Company's financial statements for year 2525 show Balance Sheet, 12/31/2525 Income, 1/1 12/31/2525 $1,650 Current assets $2,550 Debt Sales $22,475 $5,600 PP&E $4,700 Stockholders' equity. total costs $21,310 $7,250 Total assets $7,250 net income $1,165 This Company is in an industry where the average net profit margin is 5.08%, the debt-to-asset ratio (= Debt/Total assets) is 19.0%, and return on equity is 19.06%. For the company relative to the industry, select the one statement most consistent with the DuPont analysis. the company's equity multiplier indicates the firm has an unusually large debt burden the company's profit margin indicates its revenues are unusually large relative to its costs the company's asset turnover indicates sales are unusually small relative to its assets the company's equity multiplier indicates the firm has an unusually small debt burden the company's asset turnover indicates sales are unusually large relative to its assets
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