Profitability and the DuPont Method

Three profitability ratios

The DuPont decomposition

A worked decomposition

Using profitability ratios well

Which trio lists the profitability ratios of this lesson in order from income-statement focus to balance-sheet focus?

Which expression correctly states the DuPont decomposition of return on equity?

A firm earns net income of 300,000 dollars on sales of 5,000,000 dollars, with total assets of 4,000,000 dollars and common equity of 2,500,000 dollars. Using the DuPont drivers, what is return on equity?

Two firms both report a 15 percent return on equity, but the first achieves it with a 7.5 percent margin, 1.2 turnover, and 1.67 multiplier, while the second runs a 5 percent margin, 1.5 turnover, and a 2.0 multiplier. What does the comparison reveal?

A firm runs a 6 percent margin, 1.5 asset turnover, and a 1.8 equity multiplier. If its margin falls to 5 percent while the other drivers hold, what happens to return on equity?

Why should an analyst treat a high return on equity built mainly on a high equity multiplier with special caution?

What two-word term names the DuPont driver equal to net income divided by sales? Answer in lowercase.

What three-word term names the DuPont driver equal to sales divided by total assets? Answer in lowercase.

What two-word term names the DuPont driver equal to total assets divided by common equity? Answer in lowercase.

What company, whose name the decomposition carries, first implemented this method for internal measurement in 1919? Answer with one word.