Which portion of the DuPont identity measures the financial leverage employed by a firm?
A)Both the profit margin and the equity multiplier
B)Equity multiplier
C)Total asset turnover
D)Both the capital intensity ratio and the total asset turnover
E)Both the capital intensity ratio and the debt-equity ratio

Question

Quizplus · Accepted Answer

The equity multiplier portion of the DuPont identity measures a firm's financial leverage, specifically the degree to which it has used debt financing to increase its return on equity. It is calculated as total assets divided by equity.

Which Portion of the DuPont Identity Measures the Financial Leverage