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CFA Level 1
Financial Reporting and Analysis

Calculating Financial Leverage Using DuPont Analysis

Very Hard Analysis Techniques Dupont Analysis

ABC Corp reported the following key financial figures for the year ended December 31, 2022:

  • Net Income: $500,000
  • Revenue: $2,000,000
  • Total Assets: $3,000,000
  • Shareholder's Equity: $1,500,000

Using the DuPont analysis, which breaks down Return on Equity (ROE) into three components: Profit Margin, Asset Turnover, and Financial Leverage, calculate the components to determine the effective use of ABC Corp's equity. Specifically, what is ABC Corp’s Financial Leverage ratio based on the information provided?

Hint

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