Practice question · Match the pairs
Match each DuPont component to its formula.
- Margin
- Turnover
- Leverage multiplier
- ROE
- Margin x Turnover x Leverage
- Assets / Equity
- Net profit / Revenue
- Revenue / Assets
Hints
- The decomposition splits one measure into three independent levers.
- The levers concern margin, asset use, and leverage.
Show the answer
- Margin → Net profit / Revenue
- Turnover → Revenue / Assets
- Leverage multiplier → Assets / Equity
- ROE → Margin x Turnover x Leverage
Why
DuPont's genius: one number (ROE) breaks into three levers, each diagnosable independently.
Practise Financial Statement Analysis
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More questions on Financial Statement Analysis
- EBIT 450, interest expense 90. Estimate the interest cover ratio.
- Liquidity, solvency, or profitability ratio?
- A firm's ROE rises from 12% to 20% while its ROA is unchanged. What has management actually done?
- A firm's ROE is 18% but its ROA is only 6%. The DuPont leverage multiplier must be:
- Which benchmarks make a ratio meaningful?
- A firm reports rising profit and an interest cover falling toward 1. What does that combination indicate?