The DuPont System Allows a Firm to Break Its Return

question 45

True/False

The DuPont system allows a firm to break its return on equity into a profit-on-sales component, an efficiency-of-asset-use component, and a use-of-operating leverage component.

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Definitions:

Outstanding Shares

The total number of shares of a corporation's stock that are currently owned by all shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.

Stock Split

An action by a company to divide its existing shares into multiple shares to boost the liquidity of the shares, although the overall value of the company does not change.

Market Value

The current price at which an asset or service can be bought or sold in an open market.

Treasury Stock

Shares of a company's own stock that it has reacquired from shareholders and held in the company's treasury, reducing the amount of outstanding stock.