The famous Dupont Identity breaks Return on Equity (ROE) into three components: Profit Margin, Total Asset Turnover, and Financial Leverage (Assets/Equity). 

French Corp. has an Asset/Equity ratio of 1.55. Their current Total Asset Turnover has recently fallen to 1.20, bringing their ROE down to 9.1%

 

a) What is this firm's Profit Margin?

 

B) If the company were able to improve its Total Asset Turnover to 1.8, what would be their new ROE?

 

Two. Sousa, Inc., has Sales of $37.3 million, Total Assets of $26.5 million, and Total Debt of $11.3 million. The company's Profit Margin is 6 percent.

 

a) What is the company's Net Income?

 

b) What is the ROA c) What is the ROE?