Q295
An equation in which total assets are multiplied to profit margin is classified as
A.
du DuPont equation
AnswerB.
turnover equation
C.
preference equation
D.
common equation
Answer: Option A
Solution
Answer: Option A
Solution:
An equation in which total assets are multiplied to profit margin is classified as du DuPont equation. In the DuPont equation, ROE is equal to profit margin multiplied by asset turnover multiplied by financial leverage. Under DuPont analysis, return on equity is equal to the profit margin multiplied by asset turnover multiplied by financial leverage.