The function described as the profit margin times the total asset turnover times the equity multiplier is known as the:
A) Du Pont identity.
B) Return on assets.
C) Statement of cash flows.
D) Asset turnover ratio.
E) Interval measure.

Question

Quizplus · Accepted Answer

The Du Pont identity breaks down the return on equity into three distinct elements: profit margin, total asset turnover, and the equity multiplier. This formula is a way to look at how effectively a company is using its assets to generate profit.

The Function Described as the Profit Margin Times the Total