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The following information is presented for a Company for three years: Year 1 Year 2 Year 3 Profit Margin Ratio or Net Profit Ratio 4.7%
The following information is presented for a Company for three years:
Year 1 | Year 2 | Year 3 | |
Profit Margin Ratio or Net Profit Ratio | 4.7% | 8.2% | 3.2% |
Return on Assets | 4.1% | 7.8% | 3.6% |
Leverage Ratio | 2.71 | 2.9 | 3.05 |
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Part 1
Using Dupont Analysis, indicate which of the following statements is true:
A.
Net Profit margin was the most significant driver of the Company's Return on Equity in Year 2 and Year 3.
B.
Leverage was the most significant driver of the Company's Return on Equity in Year 2.
C.
Year 3 resulted in the greatest Return on Equity as compared to Year 1 and Year 2.
D.
Return on Equity for Year 2 was driven more by profitability and efficiency and less by leverage.
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