# Question: The DuPont formula defines the net return on shareholders equity

The DuPont 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 the table shown below:

a. Calculate each of the five components listed above for 2010 and 2014, and calculate the return on equity (ROE) for 2010 and 2014, using all of the five components. Show calculations.

b. Briefly discuss the impact of the changes in asset turnover and financial leverage on the change in ROE from 2010 to2014.

• Operating margin

• Asset turnover

• Interest burden

• Financial leverage

• Income tax rate

Using only the data in the table shown below:

a. Calculate each of the five components listed above for 2010 and 2014, and calculate the return on equity (ROE) for 2010 and 2014, using all of the five components. Show calculations.

b. Briefly discuss the impact of the changes in asset turnover and financial leverage on the change in ROE from 2010 to2014.

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