Break down a company's Return on Equity (ROE) using the DuPont Analysis Calculator. Enter your net income, revenue, total assets, and total shareholders' equity to see how net profit margin, total asset turnover, and financial leverage each contribute to your overall ROE.
Return on Equity (ROE)
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Net Profit Margin (NPM)
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Total Asset Turnover (TAT)
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Financial Leverage (FL)
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ROE (Direct: Net Income / Equity)
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DuPont analysis is a financial framework that decomposes a company's Return on Equity (ROE) into three key components: net profit margin, total asset turnover, and financial leverage. Developed by the DuPont Corporation in the 1920s, it helps investors and analysts understand exactly which factors are driving — or dragging — a company's profitability.
The DuPont formula states: ROE = Net Profit Margin × Total Asset Turnover × Financial Leverage. In expanded form: ROE = (Net Income / Revenue) × (Revenue / Total Assets) × (Total Assets / Shareholders' Equity). This breakdown reveals whether ROE is driven by strong profitability, efficient asset use, or high leverage.
Return on Equity (ROE) measures how much net profit a company generates for every dollar of shareholders' equity. It's a key indicator of management effectiveness and overall financial health. A higher ROE generally suggests the company is using its equity capital efficiently to generate profits.
A good ROE varies by industry, but as a general benchmark many analysts consider an ROE above 15–20% to be strong. It's best to compare a company's ROE against industry peers rather than an absolute threshold, since capital-intensive industries naturally tend to have lower ROEs.
Net profit margin is the ratio of net income to revenue, expressed as a percentage. It shows how much of each dollar of sales a company retains as profit after all costs — including operating expenses, interest, and taxes — have been deducted. A higher margin indicates better cost control and pricing power.
Total asset turnover measures how efficiently a company uses its assets to generate revenue. It's calculated as Revenue divided by Total Assets. A higher ratio means the company is generating more sales per dollar of assets, which reflects strong operational efficiency.
Financial leverage in the DuPont model is the ratio of Total Assets to Total Shareholders' Equity. It reflects how much of a company's assets are financed by debt versus equity. Higher leverage can boost ROE, but it also increases financial risk — making it important to assess leverage in context alongside profitability and efficiency.
Two companies may have the same ROE but for very different reasons. One might achieve it through high profit margins, while another uses aggressive debt financing. DuPont analysis unpacks these differences, allowing you to identify whether a company's ROE is sustainable and driven by genuine operational strength or by financial risk-taking.