Asked by Aliya leblanc on Jul 17, 2024
Verified
Which of the following is NOT incorporated into the calculation of the Du Pont identity?
A) Return on assets
B) Equity multiplier
C) Total asset turnover
D) Profit margin
E) Receivables turnover
Du Pont Identity
A formula that decomposes a company's return on equity into three components: profit margin, asset turnover, and financial leverage.
Receivables Turnover
A financial ratio that measures how efficiently a company collects its accounts receivable or the firm’s efficiency in managing credit.
- Acquire knowledge on the basic tenets of financial ratio analysis and its practical applications.
- Comprehend the strategic significance of financial ratios in decision-making and performance evaluation.
Verified Answer
KL
Khuyên LavenderJul 19, 2024
Final Answer :
E
Explanation :
The Du Pont identity is a way of breaking down Return on Equity (ROE) into three important components: profit margin, total asset turnover, and the equity multiplier. Receivables turnover is not part of this calculation; it is a measure of how quickly a company collects on its receivables and does not directly factor into the Du Pont analysis.
Learning Objectives
- Acquire knowledge on the basic tenets of financial ratio analysis and its practical applications.
- Comprehend the strategic significance of financial ratios in decision-making and performance evaluation.