What is the 'DuPont Analysis'
The DuPont analysis is a method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are measured at their gross book value rather than at net book value in order to produce a higher return on equity (ROE). It is also known as "DuPont identity".
DuPont analysis tells us that ROE is affected by three things:
 Operating efficiency, which is measured by profit margin
 Asset use efficiency, which is measured by total asset turnover
 Financial leverage, which is measured by the equity multiplier
ROE = Profit Margin (Profit/Sales) * Total Asset Turnover (Sales/Assets) * Equity Multiplier (Assets/Equity)
BREAKING DOWN 'DuPont Analysis'
It is believed that measuring assets at gross book value removes the incentive to avoid investing in new assets. New asset avoidance can occur as financial accounting depreciation methods artificially produce lower ROEs in the initial years that an asset is placed into service. If ROE is unsatisfactory, the DuPont analysis helps locate the part of the business that is underperforming.

Book Value
1. The value at which an asset is carried on a balance sheet. ... 
Return On Assets Managed  ROAM
A measure of profits shown as a percentage of the capital that ... 
Return
The gain or loss of a security in a particular period. The return ... 
Leverage Ratio
Any ratio used to calculate the financial leverage of a company ... 
Abnormal Earnings Valuation Model
A method for determining a company's worth that is based on book ... 
Annuity Method Of Depreciation
A method of depreciation centered around cost recovery and a ...

Managing Wealth
Understanding the DuPont Analysis
DuPont analysis measures assets at their gross book value, rather than at net book value, in order to produce a higher return on equity (ROE). 
Investing
Decoding DuPont Analysis
Get a deeper understanding of ROE with these threestep and fivestep calculations. 
Markets
Analyzing Boeing’s Return on Equity (ROE) (BA)
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Markets
Analyzing Apple's Return on Equity (AAPL)
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Markets
Analyzing UPS's Return on Equity (ROE) (UPS)
Learn about UPS's return on equity (ROE), an important metric for investors. It is useful to compare the historical ROE and in relation to peers. 
Markets
DuPont: An Activist Investment Analysis (DD)
Learn about the activist investor campaign launched against DuPont by a hedge fund. See how the activist campaign led to the announcement of a large merger. 
Investing
How Return On Equity Can Help You Find Profitable Stocks
It pays to invest in companies that generate profits more efficiently than their rivals. This is where ROE comes in. 
Markets
Analyzing Southwest's Return on Equity (ROE) (LUV)
Find out how Southwest's net margin, asset turnover and financial leverage impact return on equity (ROE). How does its ROE compare to peers and historical results? 
Investing
Analyzing Oracle's Return on Equity (ROE) (ORCL)
Learn about Oracle's ROE. How have net profit margin, asset turnover and financial leverage influenced ROE relative to peers and historical performance? 
Markets
Analyzing 3D Systems’ Return on Equity (DDD, SSYS)
Find out how 3D Systems' ROE has changed over time and how it compares to peers. How have profitability, asset turnover and financial leverage impacted ROE?

Where did DuPont Analysis come from?
Learn the origins of the DuPont Analysis and how it evaluates the company's financial health by looking at more than profit ... Read Answer >> 
How does DuPont Analysis measure operating efficiency?
Read about how the DuPont analysis model measures and studies a company's operating efficiency, and why net profit margin ... Read Answer >> 
What is the equity multiplier's affect on Return on Equity (ROE)?
Learn about how to calculate the equity multiplier in the threestep DuPont analysis method, and see what impact a higher ... Read Answer >> 
How does DuPont Analysis measure financial leverage?
Learn about how DuPont analysis measures financial leverage using the equity multiplier, and see when the equity multiplier ... Read Answer >> 
How does the equity multiplier change in relation to asset turnover?
Find out about the relationship between the equity multiplier and the asset turnover ratio and how both are used in the DuPont ... Read Answer >> 
Should I expect growth or income from buying stock in the consumer packaged goods ...
Find out how annual returns are expressed in financial statements. How do fundamental investors measure annual returns? What ... Read Answer >>