The DuPont method recognizes the two basic ingredients in profit-making: increasing income per dollar of revenues and using assets to generate more revenues.

Question

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The DuPont method is based on the idea that increasing profitability requires attention to both revenue generation and asset utilization. It breaks down return on equity (ROE) into three components: net profit margin, asset turnover, and financial leverage. By improving any of these factors, a company can increase its ROE and ultimately its profitability.

The DuPont Method Recognizes the Two Basic Ingredients in Profit-Making