Nndupont ratio analysis pdf

A study of financial performance using dupont analysis in. The five basic dupont analysis can be elaborated depending on the analytical depth required. The first two elements together, ros multiplied by asset turnover, form roa, return on assets. Dupont analysis is an extended examination of return on equity roe of a company which analyses net profit margin, asset dupont analysis was developed by the dupont corporation in the year 1920. Ratios 1, 2, and 4 have many components, such as the turnover of accounts receivable and inventories, the ratios of cost of goods sold and other components of the income statement to sales, the days of purchases outstanding. Dupont analysis is a model widely used in financial ratio analysis to designate the ability of a company to increase its return on equity ratio roe. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. Dupont analysis formula example my accounting course. The model breaks down roe ratio into three components. Dupont mode return on equity net profit margin asset turnover ratio equity multiplier, dupont model is a tool to start off with financial statement analysis because it is based on return on equity. The dupont analysis also called the dupont model is a financial ratio based on the return on equity ratio that is used to analyze a companys ability to increase its return on equity. These two accounting ratios measure different constructs and.

The article explains the interpretation of the analysis along with the example. Pros and cons of using dupont analysis investopedia. The primary reason for the increase in return on equity ratio roe over 2019 year is the increase in profitability measured by net profit margin ratio. In other words, this model breaks down the return on equity ratio to explain how companies can increase their return for investors.