What is called DuPont analysis system and what is its main role?

DuPont Analysis uses the relationship between several major financial ratios to comprehensively analyze an enterprise's financial situation, and this analysis method was first used by DuPont in the U.S., hence the name DuPont Analysis. DuPont analysis is a classic method used to evaluate the profitability of a company and the level of return on shareholders' equity, and to evaluate the performance of an enterprise from a financial point of view. The basic idea is to break down the return on equity into a number of financial ratios step by step, which helps to analyze and compare the business performance in depth.

Basic idea:

1, return on net assets is one of the most comprehensive financial analysis indicators, is the core of the DuPont analysis system.

2, net asset margin is the most important indicator affecting the net equity margin, with strong comprehensiveness, and the net asset margin depends on the net sales margin and total asset turnover rate. Total asset turnover ratio is to reflect the turnover rate of total assets. The analysis of the asset turnover ratio needs to analyze the factors affecting the asset turnover in order to determine where the main problems affecting the company's asset turnover lie. Net sales margin reflects the level of return on sales revenue. Expanding sales revenue and reducing costs and expenses is the fundamental way to improve the profitability of corporate sales, while expanding sales, at the same time, is the necessary conditions and ways to improve asset turnover.

3, the equity multiplier indicates the degree of corporate indebtedness, reflecting the company's use of financial leverage for business activities. High gearing, equity multiplier is large, which indicates that the company's high degree of indebtedness, the company will have more leverage benefits, but the risk is also high; on the contrary, low gearing, equity multiplier is small, which indicates that the company's low degree of indebtedness, the company will have fewer leverage benefits, but the corresponding risk is also low.

Analysis steps:

1. Starting from the return on equity, gradually break down and calculate the indicators based on the accounting information (mainly balance sheet and income statement);

2. Fill in the calculated indicators into the DuPont analysis chart;

3. Gradually carry out the comparative analysis of the former and the latter, and also further carry out the analysis of the horizontal comparison between the enterprises.