Question

Using the "Dupont" system of return on investment, discussed in class prepare the various versions (scenarios) of this formula using original information from the two states to the right and with the changes below, prepare the "Dupont" system of ROI for each version.

Answer 1

Dupont sytem of Return on Investment is showing the ability of the company to increase the Return o Investment made or Return on Capital Employed. It has three main components: Profit Margin, total Asset turnover ratio, Financial leverage

Dupont Ratio is based on ROI or ROCE formula.

Various Scenarios of Formula:

ROI= (Net Profit/Capital Employed)*100

or

ROI= Profit Margin Ratio* Capital Turnover ratio

= (Net profit/sales)* (Sales/ Capital Employed)

or ROI= Profit Margin* Total Asset Turnover*Financial Leverage

= (Net profit/sales)* (Net Sales/ Total Assets)*(Total Assets/Total Equity)