Summary Business Accounting

Question:

Refer to the facts described in BE 5–16. Show the DuPont framework’s calculation of the three

components of the 2013 return on shareholders’ equity for Anderson TV and Appliance.



Answer:




Return on equity = Profit margin X Asset turnover X Equity multiplier



Net income = Net income X Total sales X Avg. total assets

Avg. total equity Total sales Avg. total assets Avg. total equity

Return on shareholders’

equity = Net income

Average shareholders’ equity

= $65,000

$522,500

= 12.4%




Profit margin = Net income

Sales

= $65,000

$420,000