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

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 Table H:

a. Calculate each of the five components listed above for 2007 and 2011, and calculate the return on equity (ROE) for 2007 and 2011, 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 2007 to2011.

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2011 Income Statement Data Revenues Operating income Depreciation and amortization Interest expense Pretax income Income taxes $542 38 $979 76 32 13 19 67 37 30 Net income after tax Balance Sheet Data Fixed assets Total assets Working capital s 41 245 123 16 159 s 70 291 157 Total debt Total shareholders equity 220