Use the DuPont system and the following data to find return on equity. Leverage ratio (assets/equity) .........
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Use the DuPont system and the following data to find return on equity.
Leverage ratio (assets/equity) ......... 2.2
Total asset turnover ............. 2.0
Net profit margin ............. 5.5%
Dividend payout ratio ...........31.8%
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.
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The Dupont analysis is an expanded return on equity formula, calculated by multiplying the net profit margin by the asset turnover by the equity multiplier. The DuPont analysis is also known as the DuPont identity or DuPont model.This Video will guide on how to calculate return on Equity and estimate profitability of shareholders using DuPont Analysis.
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