DuPont Analysis

Overview

DuPont decomposes ROE into three multiplicative components: Net Profit Margin × Asset Turnover × Equity Multiplier. This reveals whether ROE is driven by profitability, efficiency, or leverage — critical for diagnosis and comparison.

When to Use

Trigger conditions:

• User asks "why is our ROE high/low?"
• User comparing financial performance across companies
• User needs to identify which operational lever improves returns
• User analyzing profitability beyond top-line metrics

When NOT to use:

• For company valuation → use DCF
• For comprehensive ratio analysis → use Financial Ratios skill
• For strategic positioning → use SWOT