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.

DuPont Identity
An expression that breaks return on equity (ROE) down into three ... 
Return On Equity  ROE
The amount of net income returned as a percentage of shareholders ... 
Asset Turnover Ratio
The amount of sales generated for every dollar's worth of assets ... 
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 ... 
Equity Multiplier
The ratio of a company’s total assets to its stockholder’s equity. ...

Investing Basics
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). 
Fundamental Analysis
Decoding DuPont Analysis
Get a deeper understanding of ROE with these threestep and fivestep calculations. 
Stock Analysis
Analyzing Baidu's Return on Equity (ROE) (BIDU)
Find out how Baidu's return on equity (ROE) compares to industry peers and historical results. See how DuPont analysis treats net margin, asset turnover and leverage. 
Stock Analysis
Analyzing Google's Return on Equity (ROE) (GOOGL)
Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company? 
Fundamental Analysis
What Are The Main Differences Between Return On Equity (ROE) and Return On Assets?
Return on equity and return on assets are important measures for evaluating how well a company manages the capital its shareholders entrust to it. 
Stock Analysis
Analyzing Petroleo Brasileiro's Return on Equity (PBR, XOM)
Analyze the return on equity (ROE) of Petroleo Brasileiro, and identify the key factors that have driven the company's ROE down in recent years. 
Stock Analysis
Analyzing Boeing’s Return on Equity (ROE) (BA)
Learn about Boeing's return on equity and find out how the company's ROE compares to its own historical performance and aerospace industry peers. 
Active Trading Fundamentals
Analyzing Facebook's Return on Equity (FB)
Learn about Facebook's return on equity (ROE), and find out how it compares to its peers. Discover how net margin, asset turnover and financial leverage impacted its ROE. 
Active Trading Fundamentals
Analyzing Apple's Return on Equity (AAPL)
Learn about Apple's return on equity (ROE) in fiscal 2015, and find out how net profit margin, financial leverage and asset turnover impact ROE relative to its peers. 
Stock Analysis
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.

How does DuPont Analysis measure profitability?
Discover how the DuPont analysis system breaks down a company’s return on equity into three parts to fully analyze its efficiency ... Read Answer >> 
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 >> 
What are some of the advantages and disadvantages of DuPont Analysis?
Learn about the DuPont analysis financial ratio, and understand some of its primary advantages and disadvantages. 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 >>