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DuPont Equation: Expense control, asset management, and financial leverage

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What is the DuPont equation, and how does it capture the nature of expense control, efficiency of asset management, and financial leverage (or debt) of a firm? If you were the CFO of your firm (or a hypothetical firm), what variable would you concentrate your efforts on and why?

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Solution Preview

The DuPont equation is able to give insight into a company use of methods to provide above average returns to shareholders. The leaders of the company have these tools available to use. The DuPont equation measures Net Profit Margin, Asset Turnover and Leverage Ratio. The Net ...

Solution Summary

A review of the DuPont equation and the uses of the formula. Also, a company CFO will use the DuPont equation to differently based on the company's industry.