Why Is the DuPont System Used by Analysts

question 47

Multiple Choice

Why is the DuPont system used by analysts?

• A)The DuPont system provides information about the sources of a company's ROE.
• B)The DuPont system is easier to calculate than the standard ROE.
• C)The DuPont system produces different ROE results than the standard ROE formula.
• D)The DuPont system excludes leverage, which can distort the calculation of ROE.

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Definitions:

Pre-Emptive Right

The right of a shareholder to buy new shares in the same proportion as her current ownership of shares.

Closely Held Corporation

A business entity owned by a small number of shareholders, often involving family members.

Relief-From-Oppression Provisions

These provisions within corporate law allow minority shareholders to petition a court for relief against actions by the majority shareholders that are oppressive or unfairly prejudicial to their interests.

Shareholders' Meeting

A gathering of company shareholders for the purpose of discussing company affairs and making decisions on corporate matters.