Podcast
Questions and Answers
Which factors can lead to a higher return on equity according to the DuPont Identity?
Which factors can lead to a higher return on equity according to the DuPont Identity?
- Low profit margin
- High margins (correct)
- Low leverage
- Inefficient use of assets
What is the DuPont Identity?
What is the DuPont Identity?
- A tool for understanding a firm's return on equity (correct)
- A company that popularized the DuPont Identity
- A financial manager's role
- A measure of leverage
How can the DuPont Identity be used to gain a clear sense of a firm's financial picture?
How can the DuPont Identity be used to gain a clear sense of a firm's financial picture?
- By decomposing ROE into its drivers (correct)
- By understanding the sources of profit margin
- By multiplying ROE by (sales/sales)
- By rearranging the terms in the equation
What does the DuPont Identity express return on equity as?
What does the DuPont Identity express return on equity as?
What is the first step in understanding the DuPont Identity?
What is the first step in understanding the DuPont Identity?
Which financial statement provides a measure of the firm's profit over a given time period?
Which financial statement provides a measure of the firm's profit over a given time period?
Why does net income not correspond to cash earned?
Why does net income not correspond to cash earned?
What are examples of non-cash entries on the income statement?
What are examples of non-cash entries on the income statement?
What does the statement of cash flows determine?
What does the statement of cash flows determine?
Why is cash important for a firm?
Why is cash important for a firm?