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 ?
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.
SWOT analysis, DuPont analysis and financial benchmarking of the top 10 biotech companies.
Strategies and future plans of the company are also discussed and are analysed using SWOT and DuPont analysis and recommendations for company's future operations are presented.