Mcdonald’s versus wendy’s | Business & Finance homework help
The next step is to calculate the profit margin by dividing net income by total revenues, expressed as a percentage. Then, total asset turnover can be determined by dividing total revenues by total assets. Finally, the equity multiplier can be found by dividing total assets by shareholders’ equity.
The ROE can then be calculated using the following formula: ROE = Profit Margin x Total Asset Turnover x Equity Multiplier. Additionally, it may also be useful to calculate the return on assets (ROA), which helps measure how efficiently a company utilizes its resources; this metric takes into account both profitability and efficiency and is calculated as follows: ROA = Net Income / Total Assets.
By understanding each component of DuPont Analysis we are better equipped for making informed decisions that will ultimately lead to success for any given business or organization