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D076 - Module 7 - DuPont Framework
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DuPont Dairy Farm - * ROA > Loan interest rates is competitive * ROA = Net Income / Total Assets * Leverage Multiplier = Total Assets / Owner Equity * Taking on additional loans would change Total Assets but keep Owner Equity same -- Allows expansion DuPont Decomposition Components - * Net ...

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  • February 3, 2024
  • 3
  • 2023/2024
  • Exam (elaborations)
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  • d076 module 7 dupont framework

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D076 - Module 7 - DuPont Framework
DuPont Dairy Farm - ✔✔* ROA > Loan interest rates is competitive

* ROA = Net Income / Total Assets

* Leverage Multiplier = Total Assets / Owner Equity

* Taking on additional loans would change Total Assets but keep Owner Equity same

-- Allows expansion



DuPont Decomposition Components - ✔✔* Net Profit Margin

* Total Asset Turnover

* Leverage Multiplier



DuPont Equation - ✔✔* Return on Equity is a function of:

-- Operating efficiency

-- Asset efficiency

-- Financing policy

* Decomposition of Return on Equity



DuPont Equation Purpose - ✔✔* Return on all investors measured by company's profitability and asset
usage efficiency

* Effect of debt appears only of ROE



DuPont Framework - ✔✔* Decomposes Return on Equity by analyzing which activities contribute to
ROE changes



DuPont Leverage Multiplier - ✔✔* Ratio lower than industry norm indicated company is more
conservatively financed

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