Week 2 Lessons

Quoting directly from the FYP lecturing prof: "To do a good FYP, one must KISS and be obsessive!"

KISS as in keeping it short and simple and obsessive in recording results. Muackz!

From Finance, Du Pont system is defined by:
Return of Equity = Profit Margin X Total Asset Turnover X Equity Multiplier

which is derived from as follows:

ROE = (NI/TE)
= (NI/TE)(TA/TA) (multiply TA/TA cos it is equal to 1 and rearrange)
= (NI/TA)(TA/TE) (multiply Sales/Sales cos it is equal to 1 and rearrange)
= (NI/TA)(TA/TE)(Sales/Sales)
= (NI/Sales)(Sales/TA)(TA/TE)
= (PM)(TATO)(EM)

where NI -> Net Income
TE -> Total Equity
TA -> Total Assets
ROE -> Return of Equity
PM -> Profit Margin
TATO -> Total Asset Turnover
EM -> Equity Multiplier

I friggin swear that whoever came out with this way of definitions in finance MUST be an engineer! I mean...who on earth would ever think of multiplying Sales/Sales?!?!