Advantages and disadvantages of DuPont analysis method

First, the advantages of DuPont analysis method:

1, which helps enterprise management to see more clearly the determinants of return on equity capital, and the correlation among net profit rate of sales, total assets turnover rate and debt ratio.

2. It provides a clear roadmap for the management to examine the efficiency of the company's asset management and whether to maximize the return on investment of shareholders.

Second, the shortcomings of DuPont analysis method:

1. Paying too much attention to short-term financial results may encourage the short-term behavior of the company's management and ignore the long-term value creation of the company.

2. Financial indicators reflect the past business performance of enterprises and measure whether enterprises in the industrial age can meet the requirements. However, in the information age, customers, suppliers, employees, technological innovation and other factors have more and more influence on the business performance of enterprises, and DuPont analysis is powerless in these aspects.

3. In the market environment, the intangible knowledge assets of enterprises are very important to improve the long-term competitiveness of enterprises, but DuPont analysis method can not solve the valuation problem of intangible assets.

Extended data?

19 12, Frank Donaldson Brown, a salesman of DuPont, wrote a report to explain the company's operational efficiency to the management. The report said that "it is necessary to analyze the profit rate earned with the company's own money", and he dismantled this ratio.

The essence of DuPont analysis method is to analyze the net profit rate, which is a financial tool to decompose the net profit rate of enterprise operation into several influencing types and analyze different influencing factors one by one. The formula for calculating the net interest rate of equity is: net profit/average net assets (owner's equity), which reflects the profitability ratio of owners (investors). That is, the ratio of enterprise profitability to ownership.

The advantage of DuPont's analysis system is to organically combine the balance sheet and the income statement, examine the strengths and weaknesses of our company and companies in the same industry from different angles, and improve or maintain them after finding them.

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