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7. DuPont equation Aa Aa E Corporate decision makers and analysts often use a particular technique, called a DuPont analysis,
Most investors and analysts in the financial community pay particular attention to a companys ROE. The ROE can be calculated
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Answer #1

The equation is

ROE = Profit Margin * Total Assets Turnover * Equity Multiplier

ROE = Net Income/Sales * Sales/Total Assets * Total Assets/Total Common Equity

Hence, factors affecting are Operational Efficiency and Financial leverage

The correct statement is:

The main driver of Company C’s superior ROE, as compared with that of Company A’s and Company B’s ROE, is its greater use of debt financing.

Equity multiplier = Total Assets/Total Common Equity

Since Equity multiplier is higher, equity is lower for Company C which reflects higher debt financing

Company A uses lower debt financing

Profit Margins are almost same

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