The DuPont Method Return on Assets Uses Two Component Ratios

question 1

Multiple Choice

The DuPont method return on assets uses two component ratios.What are they?

• A)Inventory turnover * gross profit margin
• B)Times interest earned * debt ratio
• C)Return on equity * dividend payout
• D)Net profit margin * total asset turnover
• E)Return on investment * total investment turnover

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Definitions:

Underinvestment

Underinvestment occurs when a company or individual invests less than what is necessary to achieve optimal growth or returns.

Wasteful Spending

This refers to the unnecessary or excessive use of funds.

Corporate Valuation Model

Defines the total value of a company as the value of operations plus the value of nonoperating assets plus the value of growth options.

Pro Forma

Financial statements or projections based on hypothetical scenarios or certain assumptions to forecast future performance.