Return on Equity Calculator using Dupont Analysis
Return on Equity (ROE) is a crucial financial metric that measures a company’s profitability relative to shareholder investments. The Dupont Analysis breaks down ROE into its three components: Profit Margin, Asset Turnover, and Equity Multiplier. This calculator helps you understand and calculate ROE using the Dupont Analysis.
- Enter the required financial data: Net Income, Average Equity, Average Assets, and Sales.
- Click the “Calculate” button.
- View the results below the calculator.
The Dupont Analysis formula is: ROE = Profit Margin * Asset Turnover * Equity Multiplier. Here’s how we calculate each component:
- Profit Margin = Net Income / Sales
- Asset Turnover = Sales / Average Assets
- Equity Multiplier = Average Assets / Average Equity
| Company | ROE |
|---|---|
| Apple | 34.4% |
| Microsoft | 27.8% |
| Amazon | 12.3% |
| Company | Profit Margin | Asset Turnover | Equity Multiplier |
|---|---|---|---|
| Apple | 22.6% | 1.5 | 2.3 |
| Microsoft | 21.1% | 1.3 | 2.2 |
| Amazon | 5.6% | 1.1 | 1.1 |
- Improve Profit Margin by increasing sales or reducing costs.
- Increase Asset Turnover by improving inventory management or increasing sales.
- Manage Equity Multiplier by balancing debt and equity financing.
What is a good ROE?
A good ROE varies by industry, but generally, a ROE above 15% is considered good.
How does Dupont Analysis help?
Dupont Analysis helps identify areas for improvement in a company’s profitability.