Two companies can have the same ROE for very different reasons – one through high margins, another through heavy borrowing. The DuPont breakdown, first used at DuPont in the 1920s, reveals which.
How to use the DuPont Analysis Calculator
- Sales (revenue)
- Net income
- Total assets
- Total equity
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter sales, net income, total assets and shareholders’ equity.
Tips
- Take figures from the same financial statements and the same fiscal year.
- Compare ratios with companies in the same industry, not across industries.
- Use several valuation measures together; no single ratio tells the whole story.
- Market prices change every second – refresh the share price before you rely on a result.
Common mistakes to avoid
- Mixing per-share figures with company totals.
- Using trailing earnings for one company and forward earnings for another.
- Forgetting dilution from options and convertible securities.
Inputs explained
| Field | What to enter |
|---|---|
| Sales (revenue) | Amount in your currency |
| Net income | Amount in your currency |
| Total assets | Amount in your currency |
| Total equity | Amount in your currency |
What each result means
- Net profit margin = [Net income]÷[Sales (revenue)]×100
- Total asset turnover = [Sales (revenue)]÷[Total assets]
- Financial leverage (equity multiplier) = [Total assets]÷[Total equity]
- Return on equity (ROE) = [Net profit margin]×[Total asset turnover]×[Financial leverage (equity multiplier)]
- Return on assets (ROA) = [Net income]÷[Total assets]×100
Example values
How the main result changes when Sales changes and everything else stays at the example values above:
| Sales (revenue) | Return on equity (ROE) (%) |
|---|---|
| 2,500,000 | 25 |
| 3,750,000 | 25 |
| 5,000,000 | 25 |
| 6,250,000 | 25 |
| 7,500,000 | 25 |
| 10,000,000 | 25 |
Formula
ROE = net profit margin × asset turnover × equity multiplier= (net income ÷ sales) × (sales ÷ total assets) × (total assets ÷ equity)Worked example
Inputs — Sales (revenue): $5,000,000; Net income: $400,000; Total assets: $4,000,000; Total equity: $1,600,000.
Results — Net profit margin = 8 %; Total asset turnover = 1.25 ×; Financial leverage (equity multiplier) = 2.5 ×; Return on equity (ROE) = 25 %; Return on assets (ROA) = 10 %.
Frequently asked questions
What is DuPont analysis?
A breakdown of ROE into margin, turnover and leverage.
Why is it useful?
It shows whether ROE comes from operations or from debt.
What is the 5-step DuPont?
It also splits margin into tax burden, interest burden and operating margin.
What formula does the DuPont Analysis Calculator use?
ROE = net profit margin × asset turnover × equity multiplier.