In Dupont Analysis, what does ROE stand for?

In Dupont Analysis, ROE stands for Return on Equity. This is a key financial metric that measures a company's profitability relative to shareholders' equity. It indicates how effectively management is using a company’s assets to create profits.

Return on Equity is calculated by dividing the net income by average shareholders' equity. This allows investors to gauge how well their investment is being managed and how efficiently the company is generating profit from its equity base. The Dupont Analysis further breaks down ROE into components such as profit margin, asset turnover, and financial leverage, providing a more detailed view of what factors are driving the company's return on equity.

The other options do not accurately represent the concept of ROE. Return on Expenses, Rate of Earnings, and Return on Earnings are not established financial terms used within the context of Dupont Analysis. While they may seem related to financial performance, they do not properly describe the relationship between net income and equity that ROE signifies.