Apply DuPont Disaggregation of ROESelected balance sheet and income statement information for Facebook Inc. follows.$ millionsDec. 31, 2018Dec. 31, 2017Total assets$98,899$86,089Total liabilities14,77211,742Sales57,403 Net income23,677

Name: Apply DuPont Disaggregation of ROESelected balance sheet and income st
Uploaded: 2024-03-04T10:43:15.000Z
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Description: Apply DuPont Disaggregation of ROESelected balance sheet and income statement information for Facebook Inc. follows.$ millionsDec. 31, 2018Dec. 31, 2017Total assets$98,899$86,089Total liabilities14,77211,742Sales57,403 Net income23,677

Dupont equation is very important for calculating the return on equity. Return on equity is segregated into three parts and it shows the efficiency of the firm.Average assets =( Assets 2018 + Assets 2019)/2=(98899+86089)/2=$92494 Average assets =$92494 Average liabilities =(14772+11742)/2=$13257 Average liabilities =$13257 Average equity = Average assets- average laibilties =92494-13257=$79237 Average equity =$79237 Profit margin= Net income/sales x 100 Profit margins =23677/57403 × 100=41.25% Assets turnover = Sales/ Average assets Assets turnover =57403/92494 =0.62 Equity multiplier = Average assets/ Average equity =92494/79237=1.167 Equity multiplier =1.167 DUPONT equation Return on equity = Profit margin x assets turnover ratio x equity multiplier Return on equity =41.25 × 0.62 x 1.167=29.85% Return on equity by DUPONT equation=29.85% Direct calculations ROE=Net income/ Equity x 100=23677/79237 × 100=29.88% ROE direct calculated =29.88% ROE by DUPONT segregation =29.85% So both are almost same.

Answered: Apply DuPont Disaggregation of ROE…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Apply DuPont Disaggregation of ROE

Selected balance sheet and income statement information for Facebook Inc. follows.

$ millions	Dec. 31, 2018	Dec. 31, 2017
Total assets	$98,899	$86,089
Total liabilities	14,772	11,742
Sales	57,403
Net income	23,677

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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