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DuPont Analysis

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and the study of accounting. Good luck!

This week's quiz brought to you by:
Barbara W. Scofield, PhD, CPA - Associate Professor of Accounting
and Director of the Financial Accounting Concentration
University of Dallas
Irving, Texas



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1 - The DuPont Analysis bases its analysis on:
Return on Equity (net income / total stockholders' equity)
Profit Margin (net income / total revenues)
Debt to Equity Ratio (total liabilities / total stockholders' equity)
Return on Sales (net income / total revenues)

2 - Financial Ratios used in DuPont Analysis whose product is Return on Equity include all of the following except:
Net Profit Margin (net income / total revenues)
Equity Multiplier (Total assets / Total stockholders' equity)
Asset Turnover (Total Revenue / Total Assets)
Debt to Equity Ratio (Total Liabilities / Total Stockholders' Equity)

3 - Leverage is a component of the DuPont Model using the following ratio:
Debt to Equity Ratio (Total Liabilities / Total Stockholders' Equity)
Debt to Assets Ratio (Total Liabilities / Total Assets)
Equity Multiplier (Total Assets / Total Stockholders' Equity)
Current Ratio (Current Assets / Current Liabilities)

4 - Asset Turnover increases, all other things being equal,
when assets increase
when assets decrease
when net income increases
when net income decreases

5 - Return on Sales increases, all other things being equal,
when Gross Margin increases
when Gross Margin decreases
when Asset Turnover increases
when Asset Turnover decreases

6 - When leverage increases:
return on equity increases
return on equity decreases
return on equity remains unaffected.
return on equity will change, but it may increase in some cases and decrease in other cases.

7 - Asset Turnover is more accurate:
if total assets at the beginning of the period is used
if total assets at the end of the period is used
if average total assets are used
if only long-term assets are used.

8 - Companies in the following industry generally have higher return on sales:
Grocery stores
Security brokers
Drug Stores
Restaurants

9 - Companies in the following industry generally have higher asset turnover:
oil and gas exploration
real estate
department stores
hotels and motels

10 - Companies in the following industry generally have higher leverage:
steel fabrication
computer services
general retail
financial institutions

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