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    Calculating ROE Using DuPont Method

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    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.

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    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