Question 3.S-TP.4: ROE and the DuPont Identity Calculate the 2018 ROE for the P...

The return on equity is the ratio of net income to total equity. For Philippe, this is
$146/$3,347 = 4.4 percent, which is not outstanding.
Given the DuPont identity, ROE can be written as follows:

ROE = Profit margin × Total asset turnover × Equity multiplier
= $146/$4,053 × $4,053/$7,380 × $7,380/$3,347\text{        }
= .036% × .549 × 2.20\text{                                                   }
= .044, or 4.4%\text{                                                             }

Notice that return on assets, ROA, is .036% × .549 = 1.98 percent.