DuPont Analysis is a financial performance framework that helps businesses to understand the key drivers of their return on equity (ROE). It breaks down ROE into three components: profit margin, asset turnover, and financial leverage. This allows businesses to identify strengths and weaknesses in different areas and develop strategies to improve performance. For example, if a company has a low profit margin, it might focus on strategies to reduce costs or increase prices. If it has a low asset turnover, it might look at ways to use its assets more efficiently. And if it has high financial leverage, it might consider strategies to reduce debt.
Follow up to the first part of our Business Strategies and Frameworks compilation, part 2 offers you...
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