Question

Dupont Chart: Fill in the blanks

	2000	2001	2002
ROE	16.50%	16.65%
EM	1.22		1.31
ROA		13.80%	13.23%
PM	9.02%		9%
TAT	1.5	1.5

Answer 1

Return on equity(ROE) = Net Profit Margin(PM) * Total asset turnover(TAT) * Equity multiplier(EM)

Return on asset(ROA) = PM * TAT

Yr 2000

ROA = PM * TAT = 9.02% * 1.5 = 13.53

Yr 2001

PM = ROA/TAT = 13.80%/1.5 = 9.2%

ROE = PM * TAT * EM

16.65% = 9.2% * EM * 1.5

EM = 16.65/13.80 = 1.20

Yr 2002

TAT = ROA/PM = 13.23/9 = 1.47

ROE = PM * TAT * EM

ROE = 1.47 * 9% * 1.31 = 17.33%

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