Which of the following is NOT included in the DuPont framework of the return on equity ratio?Current ratioAsset turnoverAsset-to-equity ratioReturn on sales
Question
Which of the following is NOT included in the DuPont framework of the return on equity ratio?Current ratioAsset turnoverAsset-to-equity ratioReturn on sales
Solution
The DuPont framework of the return on equity ratio includes three key components:
- Profit Margin (Net Income/Sales) - This is also known as Return on Sales.
- Total Asset Turnover (Sales/Total Assets) - This is also known as Asset Turnover.
- Equity Multiplier (Total Assets/Shareholder's Equity) - This is also known as Asset-to-Equity ratio.
Therefore, the component that is NOT included in the DuPont framework of the return on equity ratio is the Current Ratio.
Similar Questions
The DuPont ratio disaggregates Return on Equity (ROE) into three components: profit margin, asset turnover, and which of the following?
Which ratio is not one of the three ratios that multiply together to produce the return on equity ratio?Total asset turnoverNet profit marginFinancial leverageOperating profit margin
Which of the following are not long-term solvency ratios?Return on Shareholders EquityDebt Equity ratioDebt service coverage ratioLong-term debt to assets
The ratio, return on assets, is the product of the:Group of answer choicesdebt ratio and the equity ratio.asset turnover ratio and the current ratio.profit margin and the asset turnover ratio.asset turnover ratio and the days inventory ratio.
Which of the following is an asset utilization ratio?Multiple Choicereturn on assetsreceivables turnoverreturn on equitycurrent ratio
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.