The Three Summary Ratios Basic to the DuPont System of Analysis

question 8

Multiple Choice

The three summary ratios basic to the DuPont system of analysis are

• A) net profit margin, total asset turnover, and return on equity.
• B) net profit margin, total asset turnover, and equity multiplier.
• C) net profit margin, financial leverage multiplier, and return on equity.
• D) net profit margin, total asset turnover, and return on investment.

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Definitions:

Quality Of Information

Pertains to the degree of accuracy, reliability, and relevance of data or information, ensuring it is fit for making decisions.

Predictive Value

The capability of financial information to help users make accurate forecasts about future events or outcomes.

Confirmatory Value

The aspect of relevant financial information that helps users of financial statements confirm or correct prior expectations.

Mispriced Security

A financial security (such as a stock or bond) that is selling for a price significantly different from its intrinsic value.