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Ch. 14 - Financial Statement AnalysisWorksheetSee all chapters

# Ratios: DuPont Model for Return on Equity (ROE)

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Sections
Horizontal Analysis
Vertical Analysis
Common-sized Statements
Trend Percentages
Discontinued Operations and Extraordinary Items
Introduction to Ratios
Ratios: Earnings Per Share (EPS)
Ratios: Working Capital and the Current Ratio
Ratios: Quick (Acid Test) Ratio
Ratios: Gross Profit Rate
Ratios: Profit Margin
Ratios: Quality of Earnings Ratio
Ratios: Inventory Turnover
Ratios: Average Days in Inventory
Ratios: Accounts Receivable (AR) Turnover
Ratios: Average Collection Period (Days Sales Outstanding)
Ratios: Return on Assets (ROA)
Ratios: Total Asset Turnover
Ratios: Fixed Asset Turnover
Ratios: Profit Margin x Asset Turnover = Return On Assets
Ratios: Accounts Payable Turnover
Ratios: Days Payable Outstanding (DPO)
Ratios: Times Interest Earned (TIE)
Ratios: Debt to Asset Ratio
Ratios: Debt to Equity Ratio
Ratios: Payout Ratio
Ratios: Dividend Yield Ratio
Ratios: Return on Equity (ROE)
Ratios: DuPont Model for Return on Equity (ROE)
Ratios: Free Cash Flow
Ratios: Price-Earnings Ratio (PE Ratio)
Ratios: Book Value per Share of Common Stock
Ratios: Cash to Monthly Cash Expenses
Ratios: Cash Return on Assets
Ratios: Economic Return from Investing
Ratios: Capital Acquisition Ratio

Concept #1: Ratios: DuPont Model for Return on Equity (ROE)

Practice: XYZ Company had a profit margin of 8.8%, total asset turnover of 0.77, and an equity multiplier of 1.8. What is XYZ’s Return on Equity using the DuPont Model?

Practice: A company had a profit margin of 6.1%. The company’s net sales were $3,600,000 and Cost of Goods Sold was$600,000. If total assets were $3,450,000 at the beginning of the year and$4,210,000 at the end of the year, and total equity was $2,500,000 at the beginning of the year and$3,100,000 at the end of the year, what is the company’s return on equity using the DuPont model?

Practice: A company with net sales of $820,000 and net income of$210,000, average total assets of $1,400,000 and average common equity of$940,000 is using the DuPont Model for financial analysis. What is the company’s ROE?