Comprehension brought by DuPont analysis method

Friends who do accounting and investment-related work should have heard of DuPont analysis, which comprehensively analyzes the financial situation of enterprises by using the relationship between several major financial indicators and is a classic method to evaluate the performance of enterprises from the financial point of view.

Its basic idea is to gradually decompose the core index ROE (return on net assets) into arithmetic expressions of multiple financial indicators, which is helpful to deeply analyze the operation of enterprises.

The arithmetic expression of DuPont's analysis is: return on net assets = net profit rate of sales (NPM)× asset turnover rate (AU, asset utilization rate) × equity multiplier (EM). Here, I don't explain these specific financial indicators too much. Friends who are interested in learning can Baidu on their own. I am very interested in this way of thinking, which decomposes the result indicators reversely, gradually sees the overall situation and finds the best point of force.

We use this thinking framework to disassemble the performance index of enterprises: sales. If expressed by an arithmetic expression, it is: sales = flow * sales conversion rate * customer unit price. This formula is easy to understand. Let's give an example.

The total daily flow of a store is 1 1,000 people, and 2% of them place orders. Their per capita unit price is 200 yuan, so the total sales are: 1, 000 * 2% * 200 = 40,000 yuan.

According to this formula, we have three different plans to increase sales:

First, increase traffic. Need to increase traffic through various online and offline ways.

Second, improve the conversion rate. By optimizing product experience and placing orders to promote operation means, the product conversion rate will be continuously improved.

Third, increase the unit price of customers. There are also many operating routines here, and many of them have ready-made tools to use.

The above three schemes can improve the company's sales if the other two conditions remain unchanged.

Compared with the return on net assets, sales is a very basic indicator. From the above case, we can see that the basic indicators such as sales can be decomposed by this thinking framework, so other indicators of the company's operation will not be mentioned.

This analytical framework can be widely used, not only to analyze the business situation of enterprises, but also to plan personal life goals. Its core is to find the key determinants of the problem through the result index and reverse thinking, and decompose them one by one.