Statements about the dupont equation is incorrect

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Reference no: EM131828984

1. Which of the following statements about the DuPont Equation is incorrect?

A. It is essentially an extended expression of the return on equity (ROE) ratio.

B. It basically examines/analyzes the firm’s bottom line performance in terms of three major categories – profitability (cost control), asset management/usage, and liquidity.

C. The most common expression of the DuPont Equation is: ROE = NI/S x S/TA x TA/E.

D. The first two ratios multiplied (NI/S x S/TA) is the return on assets (ROA).

2. USI Corporation’s common stock is currently selling at $50 a share. The company has 2,000,000 shares of common stock outstanding. USI has just made $10,000,000 of net income and paid $4,000,000 as dividends to stockholders. Its balance sheet shows $50,000,000 for a total value of common stock. Which of the following is incorrect?

A. EPS is $5.00.

B. P/E is 10 (times).

C. Retention ratio is 40%.

D. Market-to-Book Value Ratio is 2 (times).

Reference no: EM131828984

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