Du Pont and ROE analysis
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Please analayze the performance of the company.
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Solution Summary
This solution is comprised of the analysis of a company's performance.
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The extended Du Pont equation "shows how the profit margin, total assets, turnover, and use of debt combine to determine the return on equity" (Brigham & Houston, 2007, p. 121). The formula for extended Du Pont is:
ROE = (Profit margin) (Total assets turnover) (Equity multiplier)
= (Net income / Sales) (Sales / Total assets) (Total assets / Common equity)
The company's return on common equity (ROE) decreases over its five-year period. The low ratios for return on equity mean that the company will not have an ...
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