DuPont Analysis


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DuPont Analysis

An alternative calculation of the return on equity of an investment. DuPont analysis utilizes the investment's gross book value instead of its net book value. It is calculated as:

(Profits / Sales) * (Sales / Assets) * (Assets / Equity) = DuPont Analysis return on equity

The theory behind DuPont analysis states that forms of return on equity using net book value discourage investment in new, potentially risky ventures because they underestimate the return for the first few years of the investment. The DuPont calculation attempts to remedy this situation.
References in periodicals archive ?
However, as I've noted in previous pieces in this space, fame is not often a factor in the DuPont analysis, due to lack of evidence.
Return on equity can be further understood by employing a DuPont analysis technique.
The DuPont Analysis framework will be used specifically to demonstrate the critical role of marketing as a driver of profitability.
All of the numbers used in a DuPont Analysis are easily found on an accurate income statement and balance sheet.
You can learn a lot about a company's growth potential and its alternatives for increasing its growth by using DuPont analysis to study the components of G.