DuPont Analysis Calculator
Decompose Return on Equity (ROE) into its three drivers: net profit margin, asset turnover, and financial leverage.
Results
What is it?
The DuPont model decomposes ROE into three multiplicative drivers: ROE = Net Profit Margin x Asset Turnover x Equity Multiplier. This reveals whether ROE is driven by profitability (margin), efficiency (turnover), or leverage (multiplier) — and which levers management can pull to improve returns.
How to use
Enter net income, revenue, total assets, and shareholders' equity. The calculator breaks ROE into its three DuPont components and also shows ROA (which equals margin x turnover, before leverage).
Example scenario
Net income $500k, revenue $2M, total assets $3M, equity $1.5M. Net profit margin = 25%. Asset turnover = 0.67x. Equity multiplier = 2.0x. ROE = 25% x 0.67 x 2.0 = 33.3%. ROA = 16.7%.
Pro tip
High ROE driven by high leverage (equity multiplier > 3x) can be misleading and risky. A sustainable competitive advantage shows up as consistently high margins and/or high asset turnover with moderate leverage. Compare ROE to cost of equity to determine if the company is truly creating shareholder value.