
Identify the component which is not included in the DuPont analysis of return on equity (ROE).

Answer to Problem 1MCQ
Option b. Inventory turnover is not included in the DuPont analysis of return on equity (ROE).
Explanation of Solution
DuPont analysis of return on equity (ROE):
The DuPont ratio is one of the popular methods for analyzing performance and ratios. The DuPont ratio was derived by the Corporation D for measuring the performance of the entity in the form of return on equity ratio. The DuPont analysis breaks the return on equity into three different types of ratios which are:
- Profit margin or profitability
- Asset turnover or activity ratio
- Financial leverage or solvency ratio
Justification for correct and incorrect answer:
a.
Asset turnover: This is not the correct choice as the asset turnover is one of the components which are included in the DuPont analysis of return on equity (ROE). It denotes the operating leverage.
b.
Inventory turnover: This option is the correct option because the inventory turnover ratio is not one of the components which are included in the DuPont analysis of return on equity (ROE).
c.
Financial leverage: This option is incorrect because the financial leverage is one of the components which are included in the DuPont analysis of return on equity (ROE). It denotes the solvency of the organization.
d.
Profit margin: This is an incorrect option because the profit margin is included in the DuPont analysis which is used for the profitability of the entity.
Want to see more full solutions like this?
Chapter 8 Solutions
Data Analytics For Accounting
- Compute the portion of the joint costs to be allocated to zenthara if the value basis is usedarrow_forwardI need help with accountingarrow_forwardIn August, Johnson Hair Studio provided 3,580 haircuts, styling, and coloring services at an average price of $45. During the month, fixed costs were $23,400 and variable costs were 65% of sales. Determine the contribution margin in dollars, per unit, and as a ratio. need answerarrow_forward
- Please provide the accurate answer to this general accounting problem using valid techniques.arrow_forwardThompson, Inc. had accounts receivable of $580,000 and an allowance for doubtful accounts of $23,400 just before writing off as worthless an account receivable from Sullivan Company of $2,750. The net realizable value of the accounts receivable before and after the write-off was: A. $556,600 before and $556,600 after. B. $603,400 before and $600,650 after. C. $556,600 before and $553,850 after. D. $580,000 before and $577,250 after.arrow_forwardDetermine the dollar amount of finished goods inventoryarrow_forward
- Please provide the accurate solution to this financial accounting question using valid calculations.arrow_forwardI need help with this general accounting problem using proper accounting guidelines.arrow_forwardPlease provide the accurate answer to this financial accounting problem using valid techniques.arrow_forward
- I am looking for a reliable way to solve this financial accounting problem using accurate principles.arrow_forwardCan you explain the process for solving this General accounting question accurately?arrow_forwardI am searching for the accurate solution to this general accounting problem with the right approach.arrow_forward
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning

