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A company reports return on equity of 18.4%, asset turnover of 3.5, and an equity multiplier...

A company reports return on equity of 18.4%, asset turnover of 3.5, and an equity multiplier of 2.1. Using the Dupont framework, compute the company’s profit margin.

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Answer #1

ROE=Profit margin*Total asset turnover*Equity multiplier

18.4=(Profit margin*3.5*2.1)

Profit margin=18.4/(3.5*2.1)

=2.50%(Approx).

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