The DuPont Analysis

The DuPont Analysis is a method used to understand a company's financial performance by breaking down its return on equity (ROE) into three parts: profit margin (how much profit is made from sales), asset turnover (how efficiently assets generate sales), and financial leverage (how much debt is used). This helps identify what’s driving profitability—whether it’s better sales, cost control, or more effective use of debt—allowing for more targeted business improvements and clearer comparisons with other companies.