vikas vadakara

DuPont AnalysisA type of analysis that examines a company's Return on Equity (ROE) by breaking it into three main components: profit margin, asset turnover and leverage factor.

vikas vadakara

Profit margin indicates how efficient the company’s management is in operating the company and in controlling costs.

Asset turnover measures the efficiency of the company in generating sales for every dollar of asset.

The equity multiplier shows how leveraged a company is by computing how much financing stockholders provided for every rupee of asset.

vikas vadakara

Operating Profit

Margin

Asset Turnover

Return On Assets (less

interest adj.)

Financial Structure

Return On Equity

X =

X =

IncomeStream

Investment

Stream

Earnings

Turnings

Leverage

DuPont System

vikas vadakara

A manager has basically three ways of improving operating performance in terms of ROA and ROE. Such as.........

• Increase capital asset turnover • Increase operating profit margins • Change financial leverage