Unformatted text preview: example, an acceptable current ratio for a high volume low markup business (supermarket) would be quite different from an acceptable current ratio for a low volume high markup business (jewelry store). How would the DuPont analysis overcome these problems? The Dupont Analysis breaks apart the return on equity and gets a much better understanding about where movements in the return on equity are coming from. The return on equity is a strong measure of how well the management of a company creates value for its shareholders. Therefore, if you were comparing a low markup business like a supermarket compared to a high markup business like a jewelry store the Dupont Analysis would be able to determine the appropriate values for each business in the current industry....
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- Spring '08
- Liquidity, Financial Ratio, acceptable current ratio, markup business, low markup business, high markup business