Dupont Analysis

DuPont analysis is a financial tool that assesses a company's profitability and performance by breaking down return on equity (ROE) into three components:

• Operating efficiency
• Asset efficiency
• Financial leverage

The DuPont analysis can help investors and company managers:

• Compare companies: Compare the operational efficiency of two similar companies?
• Identify strengths and weaknesses: Identify strengths or weaknesses that should be addressed?
• Avoid misleading conclusions: Help avoid misleading conclusions about a company's profitability?

The DuPont analysis is named after the DuPont Corporation, where Frank Donaldson Brown created the technique in the 1920s.?