What is the traditional financial report analysis method?

Dupont analysis is a traditional financial report analysis method.

Dupont analysis is a comprehensive analysis of the financial situation of enterprises by using the relationship between several major financial ratios. Specifically, it is a classic method to evaluate the company's profitability and the level of return on 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. Because this analysis method was first used by DuPont Company in the United States, it was named DuPont analysis method.

The main financial indicators in DuPont's analysis are as follows:

Return on net assets = net interest rate of assets (net profit/total assets) × equity multiplier (total assets/total equity capital)

And: net profit rate of assets (net profit/total assets) = net profit rate of sales (net profit/total income) × asset turnover rate (total income/total assets).

Namely: ROE = NPM)× asset turnover rate (AU, asset utilization rate) × equity multiplier (EM)

In DuPont system, including the following main indicators:

(1) ROE is the starting point and core of the whole analysis system. This indicator reflects the profitability of investors' net assets. Return on net assets is determined by sales return, total assets turnover rate and equity multiplier.

(2) The equity coefficient indicates the debt degree of the enterprise. The bigger the index, the higher the debt of the enterprise, which is the reciprocal of the asset equity ratio.

(3) return on total assets is the product of sales profit rate and total assets turnover rate, which is a comprehensive reflection of enterprise sales performance and asset operation. To improve the rate of return on total assets, it is necessary to increase sales revenue and reduce capital occupation.

(4) The turnover rate of total assets reflects the comprehensive ability of enterprise assets to realize sales revenue. When analyzing, we should comprehensively analyze whether the asset structure of the enterprise is reasonable, that is, the structural proportional relationship between current assets and long-term assets. At the same time, it is necessary to analyze the efficiency indicators of current assets turnover, inventory turnover, accounts receivable turnover and other related assets, and find out the exact reason for the change of total assets turnover.