Question
In: Accounting
Determine the following components of the DuPont framework for 2021:
Required:
1. Determine the following components of the DuPont framework for 2021:
a. Profit margin on sales
b. Asset turnover
c. Equity multiplier
d. Return on equity
2. Write an equation that relates these components in calculating ROE. Use the Peabody Toys data to show that the equation is correct.
E 4–27
Solutions
Expert Solution
1.
a. Profit margin on sales $180 ÷ $5,200 = 3.46%
b. Asset turnover $5,200 ÷ [($1,900 + 1,700) ÷ 2] = 2.89
c. Equity multiplier [($1,900 + 1,700) ÷ 2] ÷ [($550 + 500) ÷ 2] = 3.43
d. Return on equity $180 ÷ [($550 + 500) ÷ 2] = 34.3%
2.
Profit margin × Asset turnover × Equity multiplier = ROE
3.46% × 2.89 × 3.43 = 34.3%
Return on equity $180 ÷ [($550 + 500) ÷ 2] = 34.3%
Raffay answered 2 years agoRelated Solutions
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