Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: DuPont Model for Return on Equity (ROE)

Financial Accounting

14. Financial Statement Analysis

Ratios: DuPont Model for Return on Equity (ROE)

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Multiple Choice

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?

7.8%

8.8%

5.2%

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Verified step by step guidance

Calculate the Net Income using the profit margin. The formula is: Net Income = Profit Margin * Net Sales. Substitute the given values to find the Net Income.

Determine the Average Total Assets for the year. Use the formula: Average Total Assets = (Beginning Total Assets + Ending Total Assets) / 2. Substitute the given values to calculate this.

Calculate the Average Equity for the year. Use the formula: Average Equity = (Beginning Equity + Ending Equity) / 2. Substitute the given values to find the Average Equity.

Compute the Return on Assets (ROA) using the formula: ROA = Net Income / Average Total Assets. Use the Net Income and Average Total Assets calculated in previous steps.

Finally, calculate the Return on Equity (ROE) using the DuPont model. The formula is: ROE = (Net Income / Average Equity). Use the Net Income and Average Equity calculated in previous steps to find the ROE.