The Du Pont Identity Tells Us That Return on Equity

question 31

Multiple Choice

The Du Pont identity tells us that return on equity (ROE) is affected by the:

• A)equity multiplier
• B)total asset turnover
• C)profit margin
• D)none of the given answers
• E)all of the given answers

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Definitions:

Production Budget

An estimate of the total amount of production, in units, that a company needs to meet its sales goals and inventory policies.

Master Budget

A number of separate but interdependent budgets that formally lay out the company’s sales, production, and financial goals and that culminates in a cash budget, budgeted income statement, and budgeted balance sheet.

Interdependent Budgets

Budgets within an organization that are related and influenced by one another, requiring coordination for effective financial planning.

Units Produced

A measure of output from a production process, indicating the total number of complete units manufactured during a given period.