Refer to the figure above. Using the DuPont method, return on assets (investment) for Marni is approximately
A) 200%
B) 7.5%
C) 3.75%
D) None of these.

Question

Quizplus · Accepted Answer

Return on assets (ROA) = Net Income/Total Assets

Using the DuPont method, ROA can be broken down into two parts: Net Profit Margin (NPM) and Asset Turnover (AT). NPM is the ratio of net income to sales, while AT is the ratio of sales to total assets.

ROA = NPM x AT

From the given information, we can calculate NPM and AT:

NPM = Net Income/Sales = 50,000/500,000 = 0.1 or 10%
AT = Sales/Total Assets = 500,000/6,666,667 = 0.075 or 7.5%

Therefore, ROA = 10% x 7.5% = 0.75% or 7.5%. So, the best choice is B.

Refer to the Figure Above