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Why is the DuPont identity a valuable tool for analyzing the performance of a firm? Discuss the types of information

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Why is the DuPont identity a valuable tool for analyzing the performance of a firm? Discuss the types of information it reveals compared to ROE considered by itself.

DuPont Identity
The DuPont identity is an expression that shows a company's return on equity (ROE) can be represented as a product of three other ratios: the profit margin, the total asset turnover, and the equity multiplier. The formula for the DuPont identity...

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Fundamentals of corporate finance

Fundamentals of corporate finance

ISBN: 978-0078034633

10th edition

Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan

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Question Posted: March 13, 2014 07:55:56
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Related Video

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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