CFA CFA Level 1 Question of the Week – Financial Reporting and Analysis

Question of the Week – Financial Reporting and Analysis

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    • AdaptPrep
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      You are given the following financial ratios for an anonymous company:
      Net profit margin = 2%
      Total asset turnover = 5.0
      Financial leverage = 5.0
      This company’s return on equity is closest to:

      • 5%
      • 10%
      • 50%
    • AdaptPrep
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      This question requires application of DuPont analysis:

      ROE = (Net profit margin) * (Total asset turnover) * (Financial leverage) = (2%) * (5.0) * (5.0) = 50%

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