DuPont Analysis Calculator
ROE decomposition.
Decompose Return on Equity into profit margin, asset turnover, and equity multiplier using DuPont analysis to find which lever drives the result.
What this tool does
This tool performs DuPont analysis, breaking down return on equity (ROE) into three component ratios: profit margin, asset turnover, and equity multiplier. The result shows how efficiently a business converts revenue into profit, how productively it uses its assets, and what degree of financial leverage it employs. By isolating these three drivers, the analysis illustrates which operational or financial factors have the greatest influence on overall equity returns. The calculator takes net income, revenue, total assets, and shareholders' equity as inputs and models their relationships. This breakdown is useful for comparing business performance across periods or between companies. Note that the analysis reflects historical figures and assumes standard accounting definitions; it does not account for off-balance-sheet items, seasonal variations, or forward-looking adjustments.
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Formula Used
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Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
DuPont analysis decomposes ROE into three drivers: profit margin × asset turnover × equity multiplier. This reveals whether high ROE comes from operational efficiency (high margin), asset utilisation (high turnover), or financial leverage (high multiplier). Each source has different implications for sustainability and risk.
1M net income on 10M revenue (10% margin) × 10M revenue on 8M assets (1.25x turnover) × 8M assets on 3M equity (2.67x leverage) = 10% × 1.25 × 2.67 = 33.3% ROE. High ROE but leverage-driven - two-thirds comes from debt amplification rather than operational quality.
Best companies show balanced DuPont: strong margin (operational excellence), good turnover (asset efficiency), and moderate leverage (prudent financing). A 20% ROE from 15% margin × 1.33x turnover × 1.0x leverage is fundamentally stronger than 20% ROE from 5% margin × 1x turnover × 4x leverage, even though the headline number matches.
A worked example
Try the defaults: net income of 1,000,000, revenue of 10,000,000, total assets of 8,000,000, shareholders equity of 3,000,000. The tool returns 33.33%. You can adjust any input and the result updates as you type — no submit button, no reload. That's the real power here: seeing how sensitive the output is to one or two assumptions.
What moves the number most
The result responds to Net Income, Revenue, Total Assets, and Shareholders Equity. Not every input has equal weight. Adjusting one input at a time toward extreme values shows which ones move the result most.
The formula behind this
Margin = NI/Revenue. Turnover = Revenue/Assets. Multiplier = Assets/Equity. ROE = Margin × Turnover × Multiplier. Everything the calculator does is shown in the formula box below, so you can check the math against your own spreadsheet if you want.
What the score tells you
Headline financial numbers — income, savings, debt — each tell part of the story. This calculation stitches several together into a single read you can track over time. The value is in the direction, not the absolute number.
What this doesn't capture
The score is a composite of the inputs you provide. Life context — job security, family obligations, health, housing — doesn't appear in the math but shapes the real picture. Use the number as a prompt, not a verdict.
(££1,000,000/££10,000,000) × (££10,000,000/££8,000,000) × (££8,000,000/££3,000,000) = 33.33%.
Inputs
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
The calculator decomposes return on equity (ROE) into three component ratios that together explain how efficiently a business generates profit from shareholder capital. Net profit margin is computed by dividing net income by revenue, showing how much profit remains from each unit of sales. Asset turnover is calculated by dividing revenue by total assets, measuring how productively the business uses its asset base to generate sales. The equity multiplier is derived by dividing total assets by shareholders' equity, indicating the degree of financial leverage employed. ROE is then computed as the product of these three ratios. The model assumes constant relationships across the measurement period and treats all inputs as accurate snapshots of financial position. It does not account for seasonal variations, changes in accounting policies, effects of extraordinary items, or the timing and nature of underlying business transactions.
References
Frequently Asked Questions
Why decompose ROE?
Which driver matters most?
5-factor DuPont?
Benchmark by industry?
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