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In the DuPont analysis, ROE is decomposed into which three components?

A Net profit margin, asset turnover and equity multiplier
B Revenue, costs and taxes
C Current ratio, quick ratio and cash ratio
D Beta, alpha and standard deviation

Answer

Net profit margin, asset turnover and equity multiplier

DuPont shows whether ROE is driven by profitability, efficiency or leverage, which matters because leverage-driven ROE carries more risk.

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