What is DuPont analysis?

What are the three indicators of DuPont analysis?

DuPont analysis is a method used by DuPont in the United States, hence the name DuPont analysis. 1. Net interest rate on equity, also known as return on equity, is the most comprehensive financial analysis indicator and is the core of the DuPont analysis system.

2. The net interest rate on assets is the most important indicator that affects the net interest rate on equity and is highly comprehensive. The net interest rate on assets depends on the net sales interest rate and the total asset turnover rate.

Total asset turnover rate reflects the turnover speed of total assets.

To analyze the asset turnover rate, it is necessary to analyze the various factors that affect asset turnover in order to identify the main problems affecting the company's asset turnover.

Net sales profit margin reflects the income level of sales revenue.

Expanding sales revenue and reducing costs are the fundamental ways to increase a company's sales profit margin, and expanding sales is also a necessary condition and way to increase asset turnover.

3. The equity multiplier indicates the degree of debt of the company and reflects the extent to which the company uses financial leverage to conduct operating activities.

If the asset-liability ratio is high, the equity multiplier will be large, which means that the company's debt level is high, and the company will have more leverage benefits, but the risk will also be high; conversely, if the asset-liability ratio is low, the equity multiplier will be small, which means the company's debt level will be high.

If it is low, the company will have less leverage, but the corresponding risks will be lower.

1. Fully understand the important role that DuPont analysis plays in achieving corporate financial management goals, easing corporate agency conflicts, and resolving corporate pyramid risks.

Only by deeply understanding this internal connection and fully recognizing this important role can companies find ways to make full use of DuPont analysis.

2. Improve the basic work of finance and accounting, establish and improve various rules and regulations for finance and accounting, ensure the authenticity, integrity, reliability and timeliness of financial and accounting information, and improve the quality of financial and accounting information.

3. Strengthen the communication and connection between DuPont Analysis and the company's long-term strategic goals and short-term target responsibilities, and extend the function of DuPont Analysis from post-financial analysis to ex-ante strategic planning and ex-ante target responsibility management.