- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 11. Financial Analysis Techniques
- Subject 6. The DuPont System
CFA Practice Question
Which of the following financial ratios is NOT used in determining a company's return on equity with the extended DuPont model?
B. Total debt ratio
C. Operating profit margin
D. Interest expense rate
A. Total asset turnover
B. Total debt ratio
C. Operating profit margin
D. Interest expense rate
Correct Answer: B
User Contributed Comments 5
| User | Comment |
|---|---|
| Gina | The interest expense rate is part of the extended duPont equation: ROE= [(operat profit margin)(total asset turnover)-(interest expense rate)](financial leverage multiplier)(tax retention rate) |
| Gina | debt ratio=total liabilities/total assets debt to equity ratio=long-term debt/equity |
| ange | gee, i still don't see how the Total Debt Ratio relates to ROE? ... OK, D would be correct as the interest expense rate is not used to calculate the ROE using the TRADITIONAL Dupont system. However it is used in extended Dupont system. |
| cleopatraliao | total debt ration measures the financial leverage of ROE |
| johntan1979 | There is no such thing as financial leverage multiplier. It's either financial leverage or equity multiplier. |