The DuPont Method Decomposes Return on Equity into

question 33

Multiple Choice

The DuPont method decomposes return on equity into

• A) return on assets and the debt ratio.
• B) return on assets and the equity multiplier.
• C) operating income and inventory turnover.
• D) net profit margin and fixed asset turnover.

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Definitions:

Deregulate

The process of removing or reducing government regulations or restrictions in an industry to allow for more freedom and competition.

Natural Monopoly

An industry in which economies of scale are so great that a single firm can produce the industry’s product at a lower average total cost than would be possible if more than one firm produced the product.

Horizontal Market

A market that appeals to a wide range of consumers across different industries or sectors.

Contestable Market

A market with no barriers to entry or exit, where a company's prices and output are constrained by the threat of new entrants or competition rather than by existing competitors alone.