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Return on Equity Using Du Pont Analysis

1. An analyst applies the Du Pont system of financial analysis to the following data for a company:
? Leverage ratio (assets/equity) 2.2
? Total asset turnover 2.0
? Net profit margin 5.5%
? Dividend payout ratio 31.8%
What is the company's return on equity?

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I just want to confirm my answer and see the steps: (ans: The overall equation of Return on Equity (ROE) is:
ROE = Net Profit/ x Sales/ x Assets/
Sales Assets Equity

If substituted, we get = 0.055 x 2.0 x 2.2 = 0.242 or 24.2%)

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Your calculations for Return on Equity (ROE) are correct

1. An analyst applies the Du Pont system of financial analysis to the following data for a ...

Solution Summary

Calculates company's return on equity using Du Pont Analysis.

$2.19