1. Which of the following statements about the DuPont Equation is incorrect?
A. It is essentially an extended expression of the return on equity (ROE) ratio.
B. It basically examines/analyzes the firm’s bottom line performance in terms of three major categories – profitability (cost control), asset management/usage, and liquidity.
C. The most common expression of the DuPont Equation is: ROE = NI/S x S/TA x TA/E.
D. The first two ratios multiplied (NI/S x S/TA) is the return on assets (ROA).
2. USI Corporation’s common stock is currently selling at $50 a share. The company has 2,000,000 shares of common stock outstanding. USI has just made $10,000,000 of net income and paid $4,000,000 as dividends to stockholders. Its balance sheet shows $50,000,000 for a total value of common stock. Which of the following is incorrect?
A. EPS is $5.00.
B. P/E is 10 (times).
C. Retention ratio is 40%.
D. Market-to-Book Value Ratio is 2 (times).