DuPont Analysis Calculator
From net margin, asset turnover and equity multiplier, decompose and compute the Return on Equity (ROE).
Input Data
Results
At a glance:DuPont: ROE = net margin x asset turnover x equity multiplier. Net margin = earning power; asset turnover = efficiency; equity multiplier = leverage. Example: 10% x 0.8 x 2.0 = 16%. Same ROE can come from quality (margin/turnover) or risk (leverage) — DuPont exposes the source. WARNING: net margin as % (10=10%); high multiplier amplifies risk; consistent same-period data; industry context. Education, not advice.
Formula
ROE = net margin x asset turnover x equity multiplier.
net margin = net profit / revenue; asset turnover = revenue / total assets; equity multiplier = total assets / equity.
How to Use
- Enter net margin (net profit / revenue, %).
- Enter asset turnover (revenue / assets).
- Enter equity multiplier (assets / equity) for ROE.
FAQ
Why decompose ROE into three factors?
A single ROE number hides where it comes from. DuPont splits it into earning power (margin), efficiency (turnover) and leverage (multiplier) so you can see the true driver. Two firms at 16% ROE — one efficient, one debt-heavy — have very different risk and value. Decomposition also points to where to improve.
What does a high equity multiplier mean?
It = total assets / equity; higher means more debt funding assets (more leverage). It amplifies ROE in good times but also risk — profits or rates reversing hit harder. Banks/utilities are naturally leveraged; general firms with too-high multiplier warrant caution.
How do I improve ROE with DuPont?
Target the weak factor: raise margin (pricing, costs, mix), raise turnover (faster inventory/receivables, dispose idle assets), or adjust leverage. But leverage is 'trading risk for return' — the healthiest ROE gains come from margin and turnover, not just borrowing more.
What ratios do the three factors correspond to?
Net margin = net profit / revenue (earning efficiency); asset turnover = revenue / total assets (asset efficiency); equity multiplier = total assets / equity (leverage). Multiplying them cancels revenue and assets, leaving net profit / equity = ROE. So DuPont analyses ROE along 'earning x asset x leverage' dimensions.
How do I use DuPont to improve ROE?
It gives three independent levers. (1) Raise net margin via pricing, differentiation, cost control, dropping loss lines. (2) Raise asset turnover by speeding inventory/receivables, disposing idle assets, raising capacity use — key for asset-heavy firms. (3) Adjust the equity multiplier — moderate debt lifts ROE but is double-edged. Healthiest, most sustainable ROE gains come from margin and turnover (operational improvement), not pure leverage. Find your weak link (thin margin, idle assets, or wrong leverage) and fix that.
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References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.