Two companies can post identical ROE for completely different reasons — DuPont analysis breaks that single number apart to reveal which lever is actually driving it.
How it works
Net income divided by revenue gives net profit margin; revenue divided by average total assets gives asset turnover; average total assets divided by average shareholders’ equity gives the equity multiplier. Multiplying all three together reproduces ROE.
What this does not include
This does not include a five-factor extended DuPont breakdown (which further splits net margin into tax burden, interest burden, and operating margin) — this calculator uses the classic three-factor version.
How to use this calculator
- Enter net income, revenue, average total assets, and average shareholders’ equity.
Frequently asked questions
Why might two companies with the same ROE look very different under DuPont?
One might achieve it through high margins and modest leverage, while another achieves the identical ROE mainly through heavy leverage — a red flag DuPont analysis exposes that the ROE figure alone hides.
Which factor is considered riskiest to rely on?
A high equity multiplier (heavy leverage) is generally viewed as the riskiest driver of ROE, since it amplifies losses just as much as gains if the business turns down.
Where did DuPont analysis get its name?
It originated at the DuPont chemical company in the 1910s, pioneered by financial executive Donaldson Brown, and later spread into mainstream corporate and academic finance.
