The DuPont identity measures ROE by multiplying ________.
A)the current ratio × total asset turnover × the equity multiplier
B)the profitability ratio × times interest earned × the equity multiplier
C)the profitability ratio × total asset turnover × the equity multiplier
D)the current ratio × times interest earned × the equity multiplier

Question

Quizplus · Accepted Answer

The DuPont identity formula is ROE = Net Profit Margin × Total Asset Turnover × Equity Multiplier. This means that the formula for calculating ROE involves multiplying the profitability ratio (net profit margin), the total asset turnover, and the equity multiplier. Therefore, option C, which includes the profitability ratio, total asset turnover, and equity multiplier, is the correct choice.

The DuPont Identity Measures ROE by Multiplying ________