The DuPont formula allows a firm to break down its return into the net profit margin, which measures the firm's profitability on sales, and its total asset turnover, which indicates how efficiently the firm has used its assets to generate sales.

Question

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The statement correctly describes the components of the DuPont formula, which is used to analyze a company's return on equity (ROE). The formula breaks down ROE into three components: net profit margin, total asset turnover, and financial leverage. The net profit margin measures the firm's profitability on sales, while the total asset turnover indicates how efficiently the firm has used its assets to generate sales.

The DuPont Formula Allows a Firm to Break Down Its