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Answer:
As per DuPont Analysis,
ROE = Profit margin * Total Asset Turnover * Equity Multiplier
Profit Margin = 8%
Total Asset Turnover = Sales / Total Assets
Total Assets = Current Asset + Fixed Asset
Total Assets = $2 Million + $6 Million
Total Assets = $8 Million
Total Asset Turnover = 8 Million / 8 Million
Total Asset Turnover = 1.0
Equity Multiplier = Total Assets/ Total Equity
Total Equity = Total Assets – Total Liabilities
Total Liabilities = Current Liabilities + Long term Debt
Net Working Capital (NWC) = Current Assets – Current Liabilities
$1 Million = $2 Million – Current Liabilities
Current Liabilities = $1 Million
Total Liabilities = $1 Million + $3 Million
Total Liabilities = $4 Million
Total Equity = $8 Million - $4 Million = $4 Million
Equity Multiplier = 8 Million / 4 Million
Equity Multiplier = 2.0
ROE = 8% * 1.0 * 2.0
ROE = 16%
Solution
Answer:
As per DuPont Analysis,
ROE = Profit margin * Total Asset Turnover * Equity Multiplier
Profit Margin = 8%
Total Asset Turnover = Sales / Total Assets
Total Assets = Current Asset + Fixed Asset
Total Assets = $2 Million + $6 Million
Total Assets = $8 Million
Total Asset Turnover = 8 Million / 8 Million
Total Asset Turnover = 1.0
Equity Multiplier = Total Assets/ Total Equity
Total Equity = Total Assets – Total Liabilities
Total Liabilities = Current Liabilities + Long term Debt
Net Working Capital (NWC) = Current Assets – Current Liabilities
$1 Million = $2 Million – Current Liabilities
Current Liabilities = $1 Million
Total Liabilities = $1 Million + $3 Million
Total Liabilities = $4 Million
Total Equity = $8 Million - $4 Million = $4 Million
Equity Multiplier = 8 Million / 4 Million
Equity Multiplier = 2.0
ROE = 8% * 1.0 * 2.0
ROE = 16%

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AnswerAs per DuPont Analysis, ROE = Profit margin Total Asset.pdf

  • 1. Answer: As per DuPont Analysis, ROE = Profit margin * Total Asset Turnover * Equity Multiplier Profit Margin = 8% Total Asset Turnover = Sales / Total Assets Total Assets = Current Asset + Fixed Asset Total Assets = $2 Million + $6 Million Total Assets = $8 Million Total Asset Turnover = 8 Million / 8 Million Total Asset Turnover = 1.0 Equity Multiplier = Total Assets/ Total Equity Total Equity = Total Assets – Total Liabilities Total Liabilities = Current Liabilities + Long term Debt Net Working Capital (NWC) = Current Assets – Current Liabilities $1 Million = $2 Million – Current Liabilities Current Liabilities = $1 Million Total Liabilities = $1 Million + $3 Million Total Liabilities = $4 Million Total Equity = $8 Million - $4 Million = $4 Million Equity Multiplier = 8 Million / 4 Million Equity Multiplier = 2.0 ROE = 8% * 1.0 * 2.0 ROE = 16% Solution Answer: As per DuPont Analysis, ROE = Profit margin * Total Asset Turnover * Equity Multiplier Profit Margin = 8% Total Asset Turnover = Sales / Total Assets Total Assets = Current Asset + Fixed Asset Total Assets = $2 Million + $6 Million Total Assets = $8 Million
  • 2. Total Asset Turnover = 8 Million / 8 Million Total Asset Turnover = 1.0 Equity Multiplier = Total Assets/ Total Equity Total Equity = Total Assets – Total Liabilities Total Liabilities = Current Liabilities + Long term Debt Net Working Capital (NWC) = Current Assets – Current Liabilities $1 Million = $2 Million – Current Liabilities Current Liabilities = $1 Million Total Liabilities = $1 Million + $3 Million Total Liabilities = $4 Million Total Equity = $8 Million - $4 Million = $4 Million Equity Multiplier = 8 Million / 4 Million Equity Multiplier = 2.0 ROE = 8% * 1.0 * 2.0 ROE = 16%