The DuPont Analysis.
The DuPont analysis is a performance measurement that was created back in the 1920s and has stood the test of time as a simple but powerful way to determine the financial performance of your business.
It is the way for you to convert your profit and loss statement and balance sheet into a meaningful analysis of your Return on Investment (ROI) by demonstrating the return you are generating on your assets and equity. You can then determine what drives that return, and whether you are earning the return you want.
You can download a copy of the DuPont Analysis template here
It is very simple to use. You just need to enter the following information:
The excel worksheet will then calculate your various ratios and confirm your ROI.
Once you perform the analysis on your current numbers, you can then change some numbers around to see what the impact would be if you were to make some amendments to your business.
You will see the impact these changes have on your profit margin, your asset turnover and ultimately your return on assets. Now you’re starting to really see where your business is financially and what you need to do to get you to where you want to be.