Du Pont Analysis

Du Pont Analysis

A method of performance measurement that was started by the DuPont Corporation in the 1920s, and has been used by them ever since. With this method, assets are measured at their gross book value rather than at net book value in order to produce a higher ROI.

Notes:

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 ROIs in the initial years that an asset is placed into service.

See also: Asset, Depreciation