DuPont Finance Analysis

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This way to perform financial analysis started to be done by DuPont in 1920, and it gained a lot of recognition and acceptance.

  • Profitability (measured by profit margin) = Net profit/Sales
  • Operating efficiency (measured by asset turnover) = Sales/Assets
  • Financial leverage (measured by equity multiplier) = Assets/Equity

The calculation sequence is as follows:

  • ROE = (Profit margin) * (Asset turnover) * (Equity multiplier)
  • ROE = (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
  • ROE = (Net Profit/Equity)

The breakdown is shown below:

DuPont-Analysis

 

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