The DuPont identity can be used to help a financial manager determine the:
I.degree of financial leverage used by a firm.
II.operating efficiency of a firm.
III.utilization rate of a firm's assets.
IV.rate of return on a firm's assets.
A)II and III only
B)I and III only
C)II, III, and IV only
D)I, II, and III only
E)I, II, III, and IV

Question

Quizplus · Accepted Answer

The DuPont identity is a financial ratio that decomposes the return on equity (ROE) into three components: the profit margin, the asset turnover ratio, and the financial leverage ratio. The profit margin measures the firm's operating efficiency, the asset turnover ratio measures the firm's utilization rate of its assets, and the financial leverage ratio measures the degree of financial leverage used by the firm. Therefore, the DuPont identity can be used to help a financial manager determine all of the following: the degree of financial leverage used by a firm, the operating efficiency of a firm, and the utilization rate of a firm's assets.

The DuPont Identity Can Be Used to Help a Financial