On the other hand, there is a significant effect of total asset turnover and net profit margin and financing leverage jointly on DuPont Model of ROE. The results revealed that there is a significant effect of total asset turnover on DuPont Model of ROE, there is a significant effect of net profit margin on DuPont Model of ROE, and finally there is no significant effect of financing leverage on DuPont Model of ROE. Cumulative sum test using OLS CUSUM plot for parameter stability.
Cusum test eviews download#
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Cusum test eviews software#
Eviews software used, Stability diagnostics, Recursive estimates, Cusum test, Vector auto regression (VAR) model, Ordinary lease square (OLS), Wald coefficient test, and Regression analysis applied. 4 reveals that the estimated test statistic is within the 95 confidence band, hence, confirming the stability of the estimated coefficients over time. The current study applied on the Jordanian Industrial sectors for the period from 2008 to 2015 to approve the previous fact. Theoretically there is a positive relationship between the DuPont Model of ROE with its three components, total asset turnover, net profit margin, and financial leverage, and a negative relationship with the average total equity. For this reason DuPont model is considered to be the essential performance indicator in many studies. It is very important to reveal the factors which are having impact on ROE. Profitability analysis is very important factor in the performance evaluation of all companies, but it is not enough just computing ROE to evaluate performance. Performance evaluation is very fundamental to make a right decision.
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