The DuPont Formula Allows a Firm to Break Down Its

question 61

True/False

The DuPont formula allows a firm to break down its return into the net profit margin, which measures the firm's profitability on sales, and its total asset turnover, which indicates how efficiently the firm has used its assets to generate sales.

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Definitions:

Perpetual System

A system for managing inventory accounts that instantly logs inventory sales or acquisitions using computerized point-of-sale systems and software for enterprise asset management.

Ending Inventory

Ending inventory is the total value of goods available for sale at the end of an accounting period, calculated as beginning inventory plus purchases minus cost of goods sold.

Current Assets

Items of value that are likely to be cashed in, sold off, or used up within a twelve-month period or during the standard operational cycle of a company.

Gross Profit

The financial metric representing the difference between revenues and the cost of goods sold, indicating the basic profitability of a company's core operations.