Dupont Equation
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Lowes has sales of $1,000, assets of $500, a debt ratio of 30 percent, and an ROE of 15 percent. Monroe's has the same sales, assets, and net income, but its ROE is 30 percent. What is Monroe's debt ratio? (Du Pont equation?)
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Solution Summary
Calculates debt ratio using DuPont Analysis.
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Please see the attached file.
Du Pont equation is
ROE = Profit margin x Total asset turnover x Equity multiplier
Profit margin = Net Income / Sales
Total asset turnover= Sales / Total Assets
Equity multiplier= Total Assets / Equity
Lowes
Debt ratio= Debt / Total Assets = 30%
Therefore Equity / Total Assets= 70% =1-0.3
Or Equity ...
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