The DuPont system allows a firm to break its return on equity into a profit-on-sales component, an efficiency-of-asset-use component, and a use-of-operating leverage component.

Question

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The DuPont system breaks down Return on Equity into three components: profit margin (profit-on-sales), asset turnover (efficiency-of-asset-use), and financial leverage, not use-of-operating leverage.

The DuPont System Allows a Firm to Break Its Return