1. The DuPont decomposition helps explain A. what drives the earning per share and return on equity of a company B. that the return on equity of a company increases when its leverage (debt) decreases C. that the return on equity of a company increases when its profit margin increases D. A and C.
2. Sound ways to predict a firm's earnings per share are to A. rely on consensus estimates because consensus estimates are an average of individual estimates. This helps eliminate outliers. B. do it yourself, using extrapolative statistical models because you can use the methodology and model you trust the most C. rely on consensus estimates because financial analysts know best D. A and B.