Abstract: The management prepares, publishes and presents the annual reports and financial statements to various stakeholders for their varied uses. Investors are interested in understanding the amount of return generated by every $1 of their investment in terms of return on equity ratio. However, most investors find the issued financial statements and annual reports complex, confusing as well as difficult to understand. This paper analysed the performance of the Kenyan Telecommunication and Technology Industry using the three-step DuPont model that disintegrates the return on equity into its components that include the financial leverage, profit margin and total assets turnover ratios. A ten year period (2008-2017) was studied and correlation and regression analysis conducted. Correlation results revealed that profit margin and total assets turnover ratios had positive and significant association with return on equity while financial leverage had a negative and insignificant association. Regression results showed that each of the predictor variables had a positive and significant association with return on equity. Under the regression analysis, multiple correlation coefficients indicated that financial leverage, profit margin, and total assets turnover ratios combined had a positive and significant association with return on equity at 0.999. In addition, 0.998 of the variability in the return on equity was explained by the components of the three-step DuPont model.
Keywords: ROE, Total Assets Turnover, Net Profit Margin, Equity Multiplier, DuPont Model, Kenyan Telecommunication and Technology Industry.
Title: Analysis of Return on Equity of Kenyan Telecommunication and Technology Industry Using DuPont Model
Author: Samuel M. Muchori
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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