How is the DuPont system useful in analyzing a firm’s ROA and ROE? What information can...

How is the DuPont system useful in analyzing a firm’s ROA and ROE? What information can analysts infer by breaking ROE into contributing ratios? What is the mathematical relationship between each of the individual components (net profit margin, total asset turnover, and assets-to-equity ratio) and ROE? Can ROE be raised without affecting ROA? How?

Expert Solution

ekkarill92 answered 2 years ago

You are using DuPont method for analyzing a company’s increasing ROA over time. The firm’s profit...

You are using DuPont method for analyzing a company’s increasing ROA over time. The firm’s profit margin is stable and expected to remain unchanged. In which situation could the increase of the other component of the ROA concern you? No calculations needed.

DuPONT ANALYSIS Henderson's Hardware has an ROA of 7%, a 6% profit margin, and an ROE...

DuPONT ANALYSIS Henderson's Hardware has an ROA of 7%, a 6% profit margin, and an ROE of 16%. What is its total assets turnover? Round your answer to two decimal places. What is its equity multiplier? Round your answer to two decimal places.

what is ROA, what is ROE and what each of these ratios signify?

What is the DuPont formula and how is it used to improve a firm’s financial performance?

Both ROE and ROA measure profitability. Which one is more useful for comparing two companies? Why?

What can we say about the limitations involved in the assessment of ROE for analyzing the...

What can we say about the limitations involved in the assessment of ROE for analyzing the profitability of a company?Please give an understandable explanation

What is the difference between the traditional ROA measure (part of the traditional DuPont analysis) and...

What is the difference between the traditional ROA measure (part of the traditional DuPont analysis) and the return on net operating assets (RNOA)?

Compute and Compare ROE, ROA, and RNOA Selected balance sheet and income statement information for Oracle...

Compute and Compare ROE, ROA, and RNOA Selected balance sheet and income statement information for Oracle Corporation follows. (Perform the required computations from the perspective of an Oracle shareholder. $ millions May 31, 2015 May 31, 2014 Operating assets $62,090 $57,002 Nonoperating assets 54,368 38,819 Total assets 116,458 95,821 Operating liabilities 20,180 19,055 Nonoperating liabilities 41,958 24,097 Total liabilities 62,138 43,152 Total Oracle stockholders' equity 54,320 52,669 Total revenues 38,559 Operating income before tax 13,993 Nonoperating expense before tax 1,037...

A firm has an ROA of 15%, profit margin of 3% and ROE of 30%. What...

A firm has an ROA of 15%, profit margin of 3% and ROE of 30%. What is its liability to total asset ratio? 50% 60% 70% 20% A firm has an ROA of 15%, profit margin of 3% and ROE of 25%. What is its liability to total asset ratio? 59.88% 60.05% 40.00% 20.16% A firm has an ROA of 15%, profit margin of 3% and ROE of 25%. What is its liability to total asset ratio? 59.88% 60.05% 40.00%...

What happens to ROA / ROE / ROIC if the company needs additional funding, which it...

What happens to ROA / ROE / ROIC if the company needs additional funding, which it raises through additional equity ?

Question