A company with net sales of $820,000 and net income of $210,000, average total assets of $1,400,000 and average common equity of $940,000 is using the DuPont Model for financial analysis. What is the company's ROE?

Alright. So again, we've got the DuPont model question here, but I actually got a little bit of a shortcut for you in this question. A company with net sales of 820,000 and net income of 210,000, average total assets of 1,400,000 and average common equity of 940,000 is using the DuPont model for financial analysis. What is the company's ROE? So remember our DuPont model, we're dealing with that profit margin times our total asset turnover times our equity multiplier, right? And we use those 3 ratios together to get to our return on equity. Well, guess what? In this question, they gave us enough information to go through and calculate all 3 of those ratios. But remember, at the end of the day, return on equity is just our net income divided by average common equity, right? Remember, our profit margin, well, that was net income divided by net sales. Our total asset turnover is net sales divided by average total assets. And then our equity multiplier total assets, and then our equity multiplier is average total assets divided by average equity, average common equity. I'm just gonna put average equity here. Right? And guess what? At the end of the day, our return on equity is just the net income divided by average equity. So remember, in this return on equity model for the DuPont model, we've got these 3 ratios, but look at the numerators and the denominators from one ratio to the next. The net sales in the denominator cancels with the net sales in the numerator. Average total assets in the denominator, cancels with the average total assets in the numerator. What's left? Net income divided by average equity. So we don't have to go through and calculate all the ratios here. Although, they talk about the DuPont Model, you could go through all those extra steps. Well, guess what? We can take a shortcut. All we need is a net income divided by the average equity and we're going to get our answer here. Okay? So they gave us the information to do the whole DuPont Model, but let's go ahead and just calculate our return on equity. That is at the end of the day, what the problems asking us for. And on the test, you might be short on time, and this is a great shortcut to use. Alright? So what's our numerator? Net income of 210,000. Our denominator is average equity, average common equity of 940,000. So what does that give us? That's it. We're ready to solve our return on equity. 210 divided by 9.40, we get 0.223, right? Which is equal to 22.3 percent and that's our answer. A, 22.3%. Quick shortcut there. Right? So remember, you know your return on equity formula as well as the DuPont model. So if you can just use your return on equity formula to get to the answer, go ahead and do it. Alright? Let's move on to the next video.

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A company with net sales of \$820,000 and net income of \$210,000, average total assets of \$1,400,000 and average common equity of \$940,000 is using the DuPont Model for financial analysis. What is the company's ROE?

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