The DuPont identity can be computed as:
A)Net income × Profit margin × (1 + Debt-equity ratio).
B)Profit margin × 1/Capital intensity ratio × (1 + Debt-equity ratio).
C)Net income × Total asset turnover × Equity multiplier.
D)Profit margin × Total asset turnover × Debt-equity ratio.
E)Return on equity × Profit margin × Total asset turnover.

Question

Quizplus · Accepted Answer

The DuPont identity is calculated as Profit margin × Total asset turnover × Equity multiplier. The equity multiplier is (1 + Debt-equity ratio), making option B correct.

The DuPont Identity Can Be Computed As