Question: There are two formulas for calculating ROE ; one formula takes Net Income divided by Equity. The other formula , referred to as DuPont ROE,

There are two formulas for calculating ROE ; one formula takes Net Income divided by Equity. The other formula , referred to as DuPont ROE, is the product of three underlying ratios.

What are the three component ratios of DuPont ROE?

How or why might financial managers use DuPont ROE as a financial management tool as compared to the standard formula for ROE?

List one example of another financial ratio similarly comprised of multiple ratios and describe its composition (what other ratios are needed in order to calculate it).

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