What is DuPont Analysis?

DuPont Analysis, also known as DuPont Financial Analysis System, referred to as the DuPont system, is the use of the main financial ratios of the intrinsic link between the indicators of the financial position of the enterprise and the economic benefits of a comprehensive and systematic analysis and evaluation of the method. The system is to return on net assets as the leader, to the net asset interest rate and equity multiplier as the core, focusing on revealing the profitability of the enterprise and the equity multiplier on the return on net assets, as well as the impact of the relationship between the various indicators of the mutual influence of the role of the relationship. It was first successfully applied by DuPont in the U.S., so it got its name.

DuPont analysis of the relationship between several major financial indicators are:

Return on Equity = Net Asset Value? Equity multiplier

And: net asset margin = net sales margin? Asset turnover

i.e.: return on net assets = net sales margin? Asset turnover? Equity multiplier

DuPont analysis helps corporate management see more clearly the determinants of return on equity capital, and the interrelationships between net sales margin and total asset turnover and debt ratios, giving management a clear roadmap for examining the efficiency of the company's asset management and whether to maximize shareholders' return on investment.

From the point of view of enterprise performance evaluation, DuPont analysis only includes financial information, can not fully reflect the strength of the enterprise, there are great limitations, in the practical application of the need to pay attention to, must be combined with other information of the enterprise to analyze. The main performance is:

1, the short-term financial results are too much attention, may promote the short-term behavior of the company's management, ignoring the long-term value of the enterprise to create.

2, financial indicators reflect the past business performance of the enterprise, measuring the industrial era of the enterprise can meet the requirements. However, in the current information age, customers, suppliers, employees, technological innovation and other factors have a greater and greater impact on the business performance of the enterprise, and DuPont analysis in these areas is unable to help.

3. In the current market environment, the intangible knowledge assets of an enterprise are crucial to improving its long-term competitiveness, but DuPont Analysis cannot solve the problem of valuation of intangible assets.

Global Ivy Friendly Tip: The above is [ DuPont analysis method is what?

The answer to the question is [ What is DuPont Analysis?