DuPont Analysis If Epic,Inc.has an ROE = 25 percent,equity multiplier = 4,a profit margin of 12 percent,what is the total asset turnover ratio?
A)0.0833
B)0.192
C)0.5208
D)0.75

Question

Quizplus · Accepted Answer

DuPont analysis breaks down return on equity (ROE) into three components: net profit margin, total asset turnover, and financial leverage (equity multiplier).

ROE = Net Profit Margin x Total Asset Turnover x Equity Multiplier

Given: 
ROE = 25%
Equity Multiplier = 4
Net Profit Margin = 12%

To find the Total Asset Turnover, we can rearrange the DuPont formula:

Total Asset Turnover = ROE / (Net Profit Margin x Equity Multiplier)

Total Asset Turnover = 25% / (12% x 4) = 0.5208

Therefore, the answer is C) 0.5208.