DuPont Analysis Calculator

What DuPont analysis reveals

Two companies can have the same ROE for very different reasons. A luxury goods company might achieve 15% ROE through high margins and low turnover, while a grocery chain achieves 15% through thin margins and rapid turnover. DuPont analysis exposes these differences.

The framework is especially useful for identifying changes in ROE drivers over time. A rising ROE from increasing leverage (equity multiplier) is riskier than the same ROE improvement from better margins.

Three-factor formula

ROE equals the product of three ratios.

Worked example

Net income 200,000; revenue 2,000,000; assets 5,000,000; equity 2,500,000. Margin = 10%, Turnover = 0.4×, Multiplier = 2.0×. ROE = 10% × 0.4 × 2.0 = 8%.

Limitations

Uses historical accounting data. The three-factor model does not separate tax burden or interest burden — the five-factor extended DuPont model addresses this. Not applicable to firms with negative equity.