Dupont analysis

Dupont analysis uses the relationship between several major financial ratios to comprehensively analyze the financial situation of enterprises. This analysis method was first used by DuPont Company in the United States, hence the name DuPont analysis method.

Dupont analysis is a classic method used to evaluate the profitability of the company and the return level of shareholders' equity, and to evaluate the company's performance from the financial point of view. Its basic idea is to decompose the return on net assets of enterprises into the product of multiple financial ratios step by step, which is helpful to deeply analyze and compare the operating performance of enterprises.

Dupont analysis shows that the return on equity is influenced by three factors:

1, the net interest rate, measured by the net sales rate, indicates the profitability of the enterprise;

2. Total asset turnover rate, measured by asset turnover rate, indicates the operating capacity of the enterprise;

3. Financial leverage, measured by equity multiplier, indicates the capital structure of the enterprise.