Chapter 11
Financial Statement Analysis
593
AP-22B (
4
)
Du Inc. and Pont Manufacturer have been rival competitors in the hardware manufacturing
for several years. The following data was compiled for 2016.
Du
Pont
Net Profit Margin
15.00% 5.00%
Asset Turnover
0.42
1.24
Equity Multiplier
2.45
2.48
Required
a) Using the DuPont Framework, calculate the ROE for both companies.
b) Compare the ROEs determined in part a). By analysing the three components of ROE in the
DuPont Framework, explain and compare how both companies achieved their respective
ROEs.
