DuPont analysis
Also called: DuPont breakdown, DuPont formula
Splitting return on equity into net margin, asset turnover and financial leverage to see how a company earns its return.
ROE = net margin × asset turnover × financial leverage. Two companies with the same ROE can earn it in very different ways: one through high margins and little debt, another through thin margins and heavy borrowing.
Learn more in these lessons
- Return on equity (ROE)What does return on equity tell you, and when does it mislead?
- Return on assetsWhat does return on assets tell you, and when is it the right measure?
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