Using the Du Pont Identity Method, Calculate Return on Equity

question 55

Multiple Choice

Using the Du Pont Identity Method, calculate return on equity given the following information. Profit margin 16%; total asset turnover 0.85; equity multiplier 1.5.

• A) 20.40%
• B) 21.40%
• C) 22.40%
• D) 23.40%
• E) 24.40%

---

Definitions:

Unearned Revenue

Money received by a business for goods or services yet to be provided; it is recorded as a liability until the goods or services are delivered.

Balance Sheet

A financial document showing what a company owns, owes, and the equity of its shareholders at a fixed point in time.

Trial Balance

An accounting table that aggregates all ledger balances into debit and credit columns, ensuring both totals are identical.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, leading to its net income or loss.