1. Using the Dupont formula for Company A, Return on Equity (ROE) is 78.80%

*The formula used forROE=Profit Margin*Asset Turnover*Equity Multiplier

ROE = 15.52%*2.18*2.33

ROE = 78.80%

Using the above formula, Explain how working capital policy of a large textile Company A would affect the expected ROE.

Note: Questions on assessment of inventory policy, liquidity policy, credit policy, etc can be asked.