Which of the Following Scenarios Would Increase ROE Using the DuPont

question 24

Multiple Choice

Which of the following scenarios would increase ROE using the DuPont formula?

• A) An increase in profit, a decrease in total assets, and a reduction in equity
• B) An increase in profit, an increase in total assets, and an increase in equity
• C) An increase in profit, an increase in total assets, and a reduction in equity
• D) A decrease in profit, a decrease in total assets, and a reduction in equity
• E) A decrease in profit, a decrease in total assets, and an increase in equity

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Definitions:

Economic Profit

The difference between total revenue and total costs, including both explicit and opportunity costs, reflecting the additional gain or loss from a business decision.

Average Total Cost

The cost of producing each unit, calculated by dividing the overall production cost by the quantity of units made.

Marginal Cost

The extra expense that arises when one more unit of a product or service is produced.

Diminishing Returns

A principle in economics where each additional unit of input yields less and less extra output.