DuPont Analysis

DuPont Analysis is a term that refers to the decomposition of ROA and ROE indicators. DuPont chart is considered a basic pyramid structure. It belongs to the pyramid structures of ratios.

Basic equation for calculation:

ROA = ROS × Total Assets Turnover Ratio, i.e.

EBIT/Assets= EBIT/Sales × Sales/Assets

or

ROE = EAT/Sales × Sales/Assets× Assets/Equity

DuPont chart example - decomposition of ROE:

Use of the DuPont Analysis in practice: it is used for the revelation of the basic factors of efficiency. It completes the profitability ratios.

Related terms and methods:

• Cash Flow
• Financial analysis
• Profit
• Profit categories
• Profitability ratios
• ROA - Return on Assets
• ROE - Return on Equity
• ROS - Return on Sales

Related management field:

• Economy and Finance

Related discipline:

• Economics

Related profession:

• CFO (Chief Financial Officer)