Happy Life Analogy w.r.t. DuPont Ratio Analysis

Right from the start of my Career I have always been fascinated with DuPont Ratio. I think anyone related to Finance / Business Analysis would know the importance of DuPont’s approach in evaluating a Company’s Performance. In my view, the best thing about DuPont is Holistic Analysis of the Company and not a one-dimensional approach.

Given below is DuPont Ratio which says

Return on Equity (Share or Stockholder) = Net Profit Margin X Assets Turnover X Leverage

Main Takeaway from DuPont

·        Company Profitability Indicator is Net Profit Margin.

·        Company Efficiency Indicator is Asset Turnover.

·        Company Solvency Indicator is Leverage.

Evaluation of Companies should be done by a simultaneous analysis of different ratios (Net Profit Margin X Assets Turnover X Leverage) and rather than focusing on single Ratio. For Superior & Sustainable Performance one needs to have balance in all three Ratios.

Similarly in Life

ROE-Return on Life = Health X Wealth X Peace

Health signifies how much enthusiasm and energy one has to complete his or her goals and not just absence of any disease. In my opinion exercising regularly or pursuing any sports activity or any hobby can be a great energy booster.

Personally speaking, my energy /activity got increased 4X by following a regular running schedule. I ran almost 3000 KMin last year across three different continents- Asia, Africa, and the Middle East.

Wealth (Non-Monetary) I consider Knowledge, Clarity of Thinking & Attitude to learn is the Real Wealth. When I talk about Knowledge it’s both Technical Knowledge (IQ) and Emotional Knowledge (EQ).  As per a survey growing the number of CEO's have high EQ and average IQ.

Any Skill in Life can be learned by having student attitude. In last few months I embraced technology learned lot of new skills apart from Finance & Operation.

Wealth (Monetary) For a Comfortable Life for self and family one should save and invest monetary wealth regularly. I consider adopting a conservative approach both by Company and Individual is a MUST for long term development. One should always have a contingency plan for unplanned external events.

Peace: This has a different meaning for a different person. Many people achieve peace by various means as below:

·        By constantly evolving in Life, Becoming better by acquiring new skills and excelling in them.

·        Living in Present Moment- Giving 100% of one’s Energy and Focus and to one Task at a time.

·        Spending Quality Time with Family.

·        Helping others- Monetary or Knowledge. I consider Mentorship on Professional or Personal front is a great way to help others and expand one’s own knowledge.

·        Connecting to Nature. Nature has powers to produce, nurture, grow and healing. Simple morning nature walk could give us inner peace.

·        Acceptance. Accepting all equally without judgment. Realizing your view about a person signifies your own personality.

For superior and sustainable -Happy Return on Life one has to keep a balance between Health, Wealth, and Peace in one’s Life.

Hope you enjoyed reading my article as much as I enjoyed writing it.

Disclaimer: All view in above article are based on personal and professional experiences in life.