Finance Ch. 3 - Du Pont Identity - x Total Asset Turnover x...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
The Du Pont Identity Presented by: Group 6
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Du Pont Identity An expression that breaks return on equity (ROE) down into  three parts: profit margin, total asset turnover and financial  leverage.  
Background image of page 2
Du Pont Identity The Du Pont identity tells us that ROE is affected by three  things:  1.)  Operating efficiency (measured by profit margin)   2.)  Asset use efficiency (measured by total asset turnover) 3.)  Financial leverage (measured by the equity multiplier) 
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Du Pont Identity ROE = Profit Margin
Background image of page 4
Background image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: x Total Asset Turnover x Equity Multiplier Whereas: Profit Margin = Net Income Sales Total Asset Turnover = Sales Assets Equity Multiplier = Assets Total Equity Du Pont Identity If ROE is unacceptable, the Du Pont identity helps locate the part of the business that is underperforming....
View Full Document

This note was uploaded on 03/30/2008 for the course H P A 447 taught by Professor Graupensperger,ti during the Spring '08 term at Pennsylvania State University, University Park.

Page1 / 5

Finance Ch. 3 - Du Pont Identity - x Total Asset Turnover x...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online