Dupont system of financial control

Dupont system of financial control

Highlights the fact that return on assets (ROA) can be expressed in terms of the profit margin and asset turnover.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved