Why is the DuPont system used by analysts?
A)The DuPont system provides information about the sources of a company's ROE.
B)The DuPont system is easier to calculate than the standard ROE.
C)The DuPont system produces different ROE results than the standard ROE formula.
D)The DuPont system excludes leverage, which can distort the calculation of ROE.

Question

Quizplus · Accepted Answer

The DuPont system provides information about the sources of a company's ROE. It breaks down the formula into three components: net profit margin, asset turnover, and financial leverage. These components help analysts understand the factors contributing to a company's ROE and identify areas for improvement.

Why Is the DuPont System Used by Analysts