DuPont Analysis Calculator
Break down Return on Equity (ROE) into its key components for comprehensive financial analysis
Financial Data Input
Company Financial Information
Total revenue/sales for the period
Net profit after all expenses and taxes
Total assets on the balance sheet
Total shareholders' equity
DuPont Analysis Results
Example: Tech Company Analysis
Financial Data
Sales: $100,000,000
Net Income: $15,000,000
Total Assets: $80,000,000
Total Equity: $50,000,000
DuPont Breakdown
NPM: $15M ÷ $100M = 15%
TAT: $100M ÷ $80M = 1.25x
FL: $80M ÷ $50M = 1.6x
ROE: 15% × 1.25 × 1.6 = 30%
Excellent ROE driven by high profitability
DuPont Components
Net Profit Margin
Profitability
How much profit per dollar of sales
Asset Turnover
Efficiency
How efficiently assets generate sales
Financial Leverage
Leverage
How much debt finances assets
Return on Equity
Overall return
Return generated for shareholders
Analysis Tips
High ROE from profitability is most sustainable
Compare components with industry averages
Monitor trends over multiple periods
High leverage increases financial risk
Consider sustainability of each component
Understanding DuPont Analysis
What is DuPont Analysis?
DuPont Analysis is a framework that breaks down Return on Equity (ROE) into three key components: profitability, operational efficiency, and financial leverage. This decomposition helps investors understand what drives a company's ROE and assess its sustainability.
Why It Matters
- •Identifies strengths and weaknesses in company performance
- •Helps compare companies within the same industry
- •Reveals the sustainability of high ROE
- •Guides management strategy and investor decisions
The DuPont Formula
ROE = NPM × TAT × FL
Net Profit Margin × Total Asset Turnover × Financial Leverage
- NPM: Net Income ÷ Sales (Profitability)
- TAT: Sales ÷ Total Assets (Efficiency)
- FL: Total Assets ÷ Total Equity (Leverage)
- ROE: Net Income ÷ Total Equity (Return)
Example: 15% margin × 1.25 turnover × 1.6 leverage = 30% ROE
High ROE from Profitability
- ✓Most Sustainable: High margins indicate competitive advantage
- ✓Quality Indicator: Shows pricing power and cost control
- ✓Lower Risk: Less dependent on debt or asset churning
High ROE from Efficiency
- ✓Operational Excellence: Efficient asset utilization
- ✓Growth Potential: Room for margin improvement
- ⚠️Limits: Asset turnover has practical ceiling
High ROE from Leverage
- ⚠️Higher Risk: Increased financial risk and volatility
- ⚠️Sustainability: May not be maintainable long-term
- ✗Economic Cycles: Vulnerable during downturns