# Question: The Du Pont formula defines the net return on shareholders

The Du Pont formula defines the net return on shareholders’ equity as a function of the following components:

• Operating margin

• Asset turnover

• Interest burden

• Financial leverage

• Income tax rate

Using only the data in Table 17H,

a. Calculate each of the five components listed above for 2013 and 2014, and calculate the return on equity (ROE) for 2013 and 2014, using all of the five components.

b. Briefly discuss the impact of the changes in asset turnover and financial leverage on the change in ROE from 2013 to 2014.

• Operating margin

• Asset turnover

• Interest burden

• Financial leverage

• Income tax rate

Using only the data in Table 17H,

a. Calculate each of the five components listed above for 2013 and 2014, and calculate the return on equity (ROE) for 2013 and 2014, using all of the five components.

b. Briefly discuss the impact of the changes in asset turnover and financial leverage on the change in ROE from 2013 to 2014.

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