Riverton Stores is all-equity financed and has net sales of $217,800,taxable income of $32,600,a return on assets of 11.5 percent,a tax rate of 21 percent,and total debt of $63,700.What are the values for the three components of the DuPont identity?
A)11.82 percent; .9725; 1.3975
B)11.82 percent; 1.0282; 1.3975
C)11.82 percent; .9725; .7156
D)10.24 percent; 1.0282; .7156
E)10.24 percent; 1.0282; 1.3975

Question

Quizplus · Accepted Answer

The DuPont identity is: ROA = Net Profit Margin * Asset Turnover * Financial Leverage.Net Profit Margin = Taxable Income / Net Sales = $32,600 / $217,800 = 14.97%Asset Turnover = Net Sales / Total Assets = $217,800 / ($217,800 + $63,700) = 0.7735Financial Leverage = Total Assets / Shareholders' Equity = ($217,800 + $63,700) / $217,800 = 1.3975ROA = 14.97% * 0.7735 * 1.3975 = 11.82%

Riverton Stores Is All-Equity Financed and Has Net Sales of $217,800,taxable