Perform DuPont analysis for ROE decomposition.
Decompose Return on Equity (ROE) into its fundamental components: profitability, efficiency, and leverage to analyze financial performance.
For every $100 of shareholders' equity, the company generates $ in net income
Net Income / Revenue
Revenue / Total Assets
Total Assets / Shareholders' Equity
DuPont analysis breaks down Return on Equity (ROE) into three fundamental components to help identify what drives a company's profitability and financial performance.
Measures how much profit the company generates from each dollar of sales
Measures how efficiently the company uses its assets to generate sales
Measures the company's financial leverage and use of debt
Strong pricing power, efficient operations, or premium products
Efficient asset utilization, fast inventory cycles
Higher leverage, potentially higher returns but also higher risk
15%+ is generally considered strong, but varies by industry
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