What are the limitations of the traditional DuPont financial analysis system?

Limitation and improvement of DuPont financial analysis system;

Limitations of traditional DuPont analysis system;

(1) The "total assets" and "net profit" for calculating the net interest rate of total assets do not match;

(2) Do not distinguish between profit and loss of business activities and profit and loss of financial activities;

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

The basic framework of DuPont's financial analysis system;

Net interest rate = net interest rate of total assets × equity multiplier = net profit rate of sales × turnover rate of total assets × equity multiplier

Interpretation of DuPont financial analysis system;

(1) The net profit rate of sales and the total assets turnover times reflect the business strategy of the enterprise;

(2) The equity multiplier is a financial lever, which reflects the financial policy of the enterprise.

The above are the knowledge points of CPA exam explained by Bian Xiao, DuPont financial analysis system, which is clear to everyone now! From the perspective of enterprise performance evaluation, DuPont analysis method only contains financial information, which can not fully reflect the strength of enterprises and has great limitations. In practical application, it should be noted that it must be analyzed in combination with other information of the enterprise.