Question: How is the DuPont system useful in analyzing a firm s
How is the DuPont system useful in analyzing a firm’s ROA and ROE? What information can be inferred from the decomposition of ROE into contributing ratios? What is the mathematical relationship between each of the individual components (net profit margin, total asset turnover, and assets-to-equity ratio) and ROE? Can ROE be raised without affecting ROA? How?
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