Suppose that an analyst has noticed that the return on equity of the Johnson and Smith Company has declined from 2019 to 2020 Using the DuPont formula, explain the source of this decline (millions) 2019 2020 Sales $1,000 $900 Earnings before interest and taxes $400 $380 Interest expense $30 $30 Taxes $100 $90 Total assets $2,000 $2,000 Shareholders equity $1,250 $1,000

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Question: Suppose that an analyst has noticed that the return on equity of the Johnson and Smith Company has declined from 2019 to 2020. Using the

Suppose that an analyst has noticed that the return on equity of the Johnson and Smith Company has declined from 2019 to 2020. Using the DuPont formula, explain the source of this decline.

(millions)	2019	2020
Sales	$1,000	$900
Earnings before interest and taxes	$400	$380
Interest expense	$30	$30
Taxes	$100	$90
Total assets	$2,000	$2,000
Shareholders equity	$1,250	$1,000

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