Asked by Garrett Brown on Jun 05, 2024
Verified
Return on equity (ROE)by the Du Pont model provides insight with respect to a company's use of its assets.
Return On Equity
A measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.
Du Pont Model
The Du Pont Model is a framework for analyzing a company's return on equity (ROE) by breaking it down into three components: profit margin, asset turnover, and financial leverage.
- Grasp the concept of the DuPont model in dissecting ROE into component ratios.
Verified Answer
MB
MONICA BOLOGNAJun 09, 2024
Final Answer :
True
Explanation :
The Du Pont model breaks down the return on equity (ROE) into three components: net profit margin, asset turnover, and financial leverage. By analyzing these three components, it provides insights into how effectively a company is using its assets to generate profits. Therefore, the statement is true.
Learning Objectives
- Grasp the concept of the DuPont model in dissecting ROE into component ratios.