Dupont Formula Calculator

Calculate Return on Equity (ROE)







Formula

The Dupont Formula to calculate the Return on Equity (ROE) is:

\[ \text{ROE} = \left( \frac{\text{Net Income}}{\text{Total Revenue}} \right) \times \left( \frac{\text{Total Revenue}}{\text{Total Assets}} \right) \times \left( \frac{\text{Total Assets}}{\text{Equity}} \right) \]

Where:

What is the Dupont Formula?

The Dupont Formula is a financial analysis tool used to calculate a company’s Return on Equity (ROE). It breaks down ROE into three components:

By analyzing these components, the Dupont Formula provides insight into the factors contributing to a company’s ROE and helps identify areas of operational strength and weakness.

Example Calculation

Consider the following example:

Using the formula:

\[ \text{ROE} = \left( \frac{50,000}{200,000} \right) \times \left( \frac{200,000}{500,000} \right) \times \left( \frac{500,000}{250,000} \right) = 0.25 \times 0.4 \times 2 = 0.20 \text{ or } 20\% \]

This means the Return on Equity (ROE) is 20%.