What Is the DuPont Formula and How Is It Used in Finance?
By decomposing ROE into three distinct componentsprofit margin, asset turnover, and financial leverageaccountants can gain a deeper understanding of what drives a company’s profitability. This granular approach allows for more targeted financial analysis and strategic decision-making. By breaking down ROE into these factors, investors can pinpoint whether a company’s strength lies in its operational efficiency, …
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