Which ratio analysis technique breaks down Return on Equity (ROE) into profit margin, asset turnover, and financial leverage?

Explanation

• Three-step DuPont Analysis decomposes Return on Equity: $text{ROE} = text{Net Profit Margin} times text{Asset Turnover} times text{Equity Multiplier}$.
• It isolates whether ROE performance is driven by operational efficiency, asset utilization, or financial leverage (debt usage).
• Financial leverage is represented by the Equity Multiplier (Total Assets / Total Equity).