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Essay / Research Paper Abstract
A 3 page paper finding the DuPont Identity for Bethesda Mining Company. Based on ROE, the value of the DuPont Identity is equal to ROE. Its value is that it demonstrates the extent to which ROE is affected by operating efficiency, asset use efficiency and financial leverage. If ROE is unsatisfactory, then the DuPont Identity provides a means of determining where the greatest weakness lies. Bibliography lists 1 source.
Page Count:
3 pages (~225 words per page)
File: CC6_KSfinDuPontID.rtf
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Unformatted sample text from the term paper:
sales of $1,986,382 and net income of $157,320 for the year ending December 31, 2003. Calculate the Du Pont identity. By definition,
the DuPont identity is an expression that breaks "ROE into three parts: operating efficiency, asset use efficiency, and financial leverage" (Ross, Westerfield and Jordan, 2004; p. 62). It
is derived from the combination of Return on Equity (ROE), Return on Assets (ROA) and Debt/Equity (D/E) ratios. The DuPont Identity itself reduces down to: Net Income x Sales
x Assets Sales Assets Total Equity Finding the DuPont Identity according to the path chosen by Ross, Westerfield and Jordan (2004)
requires several values, all of which can be found on or derived from the balance sheet. Table 1 lists all of the items required for calculating the DuPont Identity,
which are net income, total equity, total assets, sales and debt. Table 1. Necessary Values Necessary Values As of
December 31, 2003 Net Income (NI) 157,320 Total Equity (TE) 385,826 Total Assets (TA) 744,974 Sales (S) 1,986,382 Debt (D) 359,148
From these values, the common approach to calculating ROE can be altered to effectively multiply ROE by 1, in the form of multiplying ROE
by Assets ? Assets. Multiplying ROE by 1 in this manner and cross-multiplying the resulting equation returns ROE expressed as: Net Income x Assets Assets Total Equity
Multiplying this value by one again, this time in the form of Sales ? Sales, returns
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