What is the DuPont formula?

ROE = Net Profit Margin × Asset Turnover × Equity Multiplier, or equivalently ROE = (Net Income / Revenue) × (Revenue / Total Assets) × (Total Assets / Equity). The revenue terms cancel, leaving Net Income / Equity — but the decomposed form reveals the source of performance.

A ROE above 15% is generally considered strong across most industries. Capital-light businesses (software, consulting) can sustain 30–50%+, while capital-intensive sectors (utilities, manufacturing) often run 8–12%. Always compare to industry peers, not an absolute threshold.

Can ROE be misleading?

Yes. A company can inflate ROE by taking on debt (increasing the equity multiplier) without improving underlying profitability. The DuPont breakdown makes this visible — a rising multiplier with flat margins signals leverage-driven ROE, not genuine operational improvement.

What does a high equity multiplier mean?

The equity multiplier equals Total Assets / Equity. A value of 2 means assets are twice the equity base, implying the company is 50% debt-financed. Higher leverage amplifies both gains and losses, so a high multiplier increases financial risk.

What is the 5-factor DuPont model?

The extended 5-factor model splits net profit margin into tax burden × interest burden × EBIT margin. This separates tax efficiency, interest costs, and operating profitability. The 3-factor model here is the most widely used starting point.

DuPont Analysis Calculator

Enter net income, revenue, total assets, and equity to decompose ROE into its three DuPont drivers: profitability, efficiency, and leverage.

Financial Inputs

Income Statement

Net Income ($)

Total Revenue ($)

Balance Sheet

Total Assets ($)

Shareholders' Equity ($)

Enter your financial figures and click Calculate

Summary

The DuPont analysis decomposes Return on Equity (ROE) into three multiplicative drivers: net profit margin (how much profit each revenue dollar generates), asset turnover (how efficiently assets generate revenue), and the equity multiplier (how much leverage amplifies returns). Understanding which factor drives — or drags — ROE helps analysts pinpoint whether a company's performance comes from operational strength, asset efficiency, or financial risk.

How it works

Enter net income from the income statement.
Enter total revenue for the same period.
Enter total assets and shareholders' equity from the balance sheet.
The calculator computes net profit margin, asset turnover, and equity multiplier.
It then multiplies the three components to produce ROE and shows each driver's contribution.

Use cases

Compare two companies with the same ROE but different underlying drivers.
Track whether improving ROE comes from real efficiency gains or rising leverage.
Identify which DuPont component to target for strategic improvement.
Perform peer benchmarking in equity research reports.
Teach the DuPont framework in finance or accounting courses.
Screen for companies with high ROE driven by margins rather than debt.

Frequently Asked Questions

Last updated: 2026-06-11 · Reviewed by Nham Vu