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THE NUMBERS ARE ON THE CHART PLEASE HELP If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the net
THE NUMBERS ARE ON THE CHART PLEASE HELP
If I remember correctly, the DuPont equation breaks down our ROE into three component ratios: the net profit margin, the total asset turnover ratio, and the equity multiplier. And, according to my understanding of the DuPont equation and its calculation of ROE, the three ratios provide insights into the company's, effectiveness in using the company's assets, and. Now, let's see your notes with your ratios, and then we can talk about possible strategies that will improve the ratios. I'm going to check the box to the side of your calculated value if your calculation is correct and leave it unchecked if your calculation is incorrect. OK, it looks like I've got a couple of incorrect values, so show me your calculations, and then we can talk strategies for improvement. I've just made rough calculations, so let me complete this table by inputting the components of each ratio and its value: I see what I did wrong in my computations. Thanks for reviewing these calculations with me. You saved me from a lot of embarrassment! Zander would have been very disappointed in me if I had showed him my original work. So, now let's switch topics and identify general strategies that could be used to positively affect Cepeus's ROE. OK, so given your knowledge of the component ratios used in the DuPont equation, which of the following strategies should improve the company's ROE? (Check all that apply.) Use more equity financing in its capital structure, which will increase the equity multiplier. Increase the efficiency of its assets so that it generates more sales with each dollar of asset investment and increases the company's total asset turnover. Decrease the company's use of debt capital because it will decrease the equity multiplier. Increase the firm's bottom-line profitability for the same volume of sales, which will increase the company's net profit marginStep by Step Solution
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