Suppose the CPI Last Year Is 121 and the CPI

question 331

Multiple Choice

Suppose the CPI last year is 121 and the CPI this year is 137.The correct method to calculate the inflation rate is

• A) (137 - 121)/100 = 0.16.
• B) 137 × 121 = 258.
• C) [(137 - 121)/121] × 100 = 13.2.
• D) (137/121) × 100 = 113.2.

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Definitions:

Du Pont Identity Method

The Du Pont Identity Method is a financial analysis framework that breaks down a company's return on equity into three parts: profitability, asset efficiency, and financial leverage.

Total Asset Turnover

A financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue; calculated by dividing sales revenue by total assets.

Equity Multiplier

The equity multiplier is a financial ratio that measures a company's leverage by dividing its total assets by its total shareholders' equity, indicating how much of the assets are financed by equity.