What are the limitations of the traditional DuPont analysis system?

Limitations of the traditional DuPont analysis system:

(1) The "total assets" for calculating the net interest rate on total assets do not match with the "net profit"; the assets involve various investors such as shareholders and creditors, and the net profit belongs to the shareholders.

(2) There is no distinction between profit or loss from operating activities and profit or loss from financial activities,

(3) There is no distinction between financial liabilities and operating liabilities.

The cost of liabilities (interest expense) is only the cost of financial liabilities; operating liabilities are interest-free. Therefore, it is necessary to distinguish between operating liabilities and financial liabilities, and interest is divided by financial liabilities to get the real average interest rate;

After distinguishing between financial liabilities and operating liabilities, financial liabilities are divided by shareholders' equity to get a more realistic financial leverage. Operating liabilities have no fixed costs and are not leveraged in the first place; counting them as financial leverage distorts the actual effect of leverage.