Which one of the following accurately describes the three parts of the DuPont identity?
A) Equity multiplier, profit margin, and total asset turnover
B) Debt-equity ratio, capital intensity ratio, and profit margin
C) Operating efficiency, equity multiplier, and profitability ratio
D) Return on assets, profit margin, and equity multiplier
E) Financial leverage, operating efficiency, and profitability ratio

Question

Quizplus · Accepted Answer

The DuPont identity breaks down Return on Equity (ROE) into three parts: profit margin (how much profit is generated from sales), total asset turnover (how efficiently assets are used to generate sales), and the equity multiplier (a measure of financial leverage). These components reflect a company's profitability, asset efficiency, and financial leverage, respectively.

Which One of the Following Accurately Describes the Three Parts