Explore BrainMass
Share

Calculating ROE Using DuPont Method

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Using the annual report information available on each of the company's websites: compute the ROE for Yahoo and Google.

Please use the DuPont Method =(Net Profit Margin) x (Asset Turnover) x (Equity Multiplier) for Year End 2010 for each company.

Please show calculations.

© BrainMass Inc. brainmass.com October 25, 2018, 6:03 am ad1c9bdddf
https://brainmass.com/business/return-on-equity/calculating-roe-using-dupont-method-446699

Solution Preview

We note that

ROE = (Profit margin)*(Asset turnover)*(Equity multiplier) = (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)

For Yahoo (figures in thousands)

Net profit = 1,231,663

Sales (aka Revenue) = ...

Solution Summary

Calculating ROE Using DuPont Method

$2.19
See Also This Related BrainMass Solution

Du Pont Method Effect on Equity

Please help with the following problems.

Using the Du Pont method, evaluate the effects of the following relationships for Moris Incorporated.

a. Moris Incorporated has a profit margin of 5 percent and its return on assets (investment) is 13.5 percent. What is its asset turnover ratio?

b. If Moris Incorporated has a debt-to-total-assets ratio of 60 percent, what will the firm's return on equity be?

c. What would happen to return on equity if the debt-to-total-assets ratio decreased to 40 percent?

View Full Posting Details