The DuPont identity can be used to help managers answer which of the following questions related to a company's operations?
I. How many sales dollars are being generated per each dollar of assets?
II. How many dollars of assets have been acquired per each dollar in shareholders' equity?
III. How much net profit is being generating per dollar of sales?
IV. Does the company have the ability to meet its debt obligations in a timely manner?
A) I and III only
B) II and IV only
C) I, II, and III only
D) II, III and IV only
E) I, II, III, and IV

Question

Quizplus · Accepted Answer

The DuPont identity is a financial ratio that breaks down return on equity (ROE) into three components: net profit margin, total asset turnover, and financial leverage. Therefore, it can answer questions related to how efficiently a company is generating sales with its assets (I), how much debt is used to finance assets relative to shareholders' equity (II), and how much profit is generated per dollar of sales (III). However, it does not directly address whether the company can meet its debt obligations (IV).

The DuPont Identity Can Be Used to Help Managers Answer