CFA Practice Question

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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?

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.
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