Many times ratios computed for a firm give a conflicting picture of performance. The DuPont...
60.1K
Verified Solution
Link Copied!
Question
Accounting
Many times ratios computed for a firm give a conflicting picture of performance. The DuPont Identity provides a way to breakdown ROE and investigate what areas of the firm need improvement.
The DuPont Identity indicates that a firms return on equity depends on its operating efficiency (profit margin), asset use efficiency (total asset turnover), and financial leverage (equity multiplier).
Equity multiplier (EM) = TA/TE = 1 + debt/equity ratio
Based on the Du Pont identity, the following factors affect the growth rate:
- Profit margin
- Total asset turnover
- Financial policy
- Dividend policy
Please explain how they affect the growth rate of a company.
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.