Under the Dupont Technique, which of the following is false? * O The return on asset is the computed by multiplying the return on sales and the asset turnover. O Dupont Technique reveals the factors that determines the firm's return on asset. Asset management, as represented by the ratio of net sales and average equity, is one of the factors that is considered in deriving the return on assets. O The Company's assessment of asset utilization and profitability can be determined by the Dupont Technique.

Under the Dupont Technique, which of the following is false? * O The return on asset is the computed by multiplying the return on sales and the asset turnover. O Dupont Technique reveals the factors that determines the firm's return on asset. Asset management, as represented by the ratio of net sales and average equity, is one of the factors that is considered in deriving the return on assets. O The Company's assessment of asset utilization and profitability can be determined by the Dupont Technique.

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter13: Valuation: Earnings-based Approach

Section: Chapter Questions

Problem 11QE

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Under the Dupont Technique, which of the following is false? a. Dupont Technique reveals the factors that determines the firm’s return on asset. b. Asset management, as represented by the ratio of net sales and average equity, is one of the factors that is considered in deriving the return on assets. c. The Company’s assessment of asset utilization and profitability can be determined by the Dupont Technique. d.The return on asset is the computed by multiplying the return on sales and the asset turnover.
Under the Dupont Technique, which of the following is false? -Asset management, as represented by the ratio of net sales and average equity, is one of the factors that is considered in deriving the return on assets. -Dupont Technique reveals the factors that determines the firm’s return on asset. -The Company’s assessment of asset utilization and profitability can be determined by the Dupont Technique. -The return on asset is the computed by multiplying the return on sales and the asset turnover.
Return on Assets, or ROA, can be expressed as the product of two ratios. Which two? Select one: a. Sales Turnover and Total Asset Turnover b. None of the options are correct c. Net income and total assets d. Profit margin and Total Asset Turnover e. Net Profit Margin and Fixed Asset turnover
Which of the following statements is correct? Statement 1. Asset utilization ratios describe how capital is being utilized to buy assets. Statement 2. Profitability ratios allow one to measure the ability of the firm to earn an adequate return on sales, total assets, and invested capital. Statement 3. Asset utilization ratios measure the returns on various assets such as return on total assets. A. Statement 1 only. B. Statement 2 only. C. Statement 3 only. D. All of the statements are correct. E. None of the statement is correct.
The return on total assets measures A. profitability by combining the effects of the profit margin and asset turnover. B.how efficiently a company uses its assets to generate sales. C.efficiency, profitability, and liquidity. D.liquidity.
Defi ning total asset turnover as revenue divided by average total assets, all else equal, impairment write-downs of long-lived assets owned by a company will most likely result in an increase for that company in: B . the total asset turnover but not the debt-to-equity ratio
How should an analyst interpret fluctuations in estimate of useful life of asset for a given company over time? How should an analyst interpret differences in this estimate between a company and its competitors?
Which of the following statements is NOT correct? Statement 1: Debt utilization ratios are used to evaluate the firm's debt position with regard to its asset base and earning power. Statement 2: The DuPont system of analysis emphasizes that profit generated by assets can be derived by various combinations of profit margins and asset turnover. Statement 3: Satisfactory return on assets may be achieved through high profit margins or rapid turnover of assets, but not a combination of both. A. Statement 1 only. B. Statement 2 only. C. Statement 3 only. D. All of the statements are NOT correct. E. All of the statements are correct.
Defi ning total asset turnover as revenue divided by average total assets, all else equal, impairment write-downs of long-lived assets owned by a company will most likely result in an increase for that company in: A . the debt-to-equity ratio but not the total asset turnover.
The asset turnover measures how effectively a business is using its assets to generate sales O True O False
A company wishes to report the highest earnings possibleaccording to GAAP. Therefore, when calculating depreciation for financial reporting purposes,a. It will follow the MACRS depreciation rates prescribedby the IRS.b. It will estimate the shortest lives possible for itsassets.c. It will estimate the longest lives possible for its assets.d. It will estimate lower residual values for its assets.
The ABC Corporation has a profit margin on sales below the industry average, yet its ROA is above the industry average. What does this imply about its asset turnover?