In the DuPont system, the return on total assets (asset) is equal to
A) (net profit margin) × (fixed asset turnover).
B) (return on equity) × (financial leverage multiplier).
C) (return on equity) × (total asset turnover).
D) (net profit margin) × (total asset turnover).

Question

Quizplus · Accepted Answer

The DuPont system states that the return on total assets (ROA) is equal to the product of two components: the net profit margin (net income divided by sales) multiplied by the total asset turnover (sales divided by total assets). Therefore, the correct choice is D, (net profit margin) × (total asset turnover).

In the DuPont System, the Return on Total Assets (Asset)