The correct answer is A. du Pont equation.
The du Pont equation is a way of analyzing a company’s financial performance by breaking down return on equity (ROE) into three components: profit margin, asset turnover, and financial leverage.
Profit margin is a measure of how much profit a company makes from each dollar of sales. Asset turnover is a measure of how efficiently a company uses its assets to generate sales. Financial leverage is a measure of how much debt a company uses to finance its assets.
The du Pont equation is calculated as follows:
ROE = Profit margin * Asset turnover * Financial leverage
The du Pont equation can be used to compare the financial performance of different companies or to track a company’s financial performance over time. It can also be used to identify areas where a company can improve its financial performance.
Option B, turnover equation, is incorrect because it does not take into account profit margin. Option C, preference equation, is incorrect because it is not a commonly used term in finance. Option D, common equation, is incorrect because it is not a specific term in finance.