Du Pont

The DuPont analysis is a method used to understand what drives a company's profitability and efficiency. It breaks down return on equity (ROE) into three parts: profit margin (how much profit is made per sale), asset turnover (how efficiently assets generate sales), and financial leverage (use of debt). By examining these components separately, investors can identify whether a company's high or low ROE results from strong profit management, efficient asset use, or leverage. This helps in assessing a company's financial health and operational performance in a detailed way.