Your close friend lost his work due to the Covid-19 pandemic. He decided to engage in a milktea business in order for him to earn some income. Fortunately, customers loved his products and his sales were surprisingly high. He decided to open another branch and since then, his milktea business earned a very good reputation and has consistently earned income more than your friend expected. Since you are a jealous type, You just also decided to open a milktea business. After a month, you computed your ROE and compared it with your friend's ROE. You were so happy that you had identical ROEs. If you applied the DuPont equation to both businesses, would you expect the three components to be the same for each business? If not, explain what balance sheet and income statement items might lead to the component differences.
Your close friend lost his work due to the Covid-19 pandemic. He decided to engage in a milktea business in order for him to earn some income. Fortunately, customers loved his products and his sales were surprisingly high. He decided to open another branch and since then, his milktea business earned a very good reputation and has consistently earned income more than your friend expected. Since you are a jealous type, You just also decided to open a milktea business. After a month, you computed your ROE and compared it with your friend's ROE. You were so happy that you had identical ROEs. If you applied the DuPont
equation to both businesses, would you expect the three components to be the same for each business? If not, explain what balance sheet and income statement items might lead to the component differences.
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