The DuPont Formula Calculator finds a company’s Return on Equity (ROE), which shows how much profit comes from the money owners put in. It breaks ROE into three parts: profit margin, asset turnover, and financial leverage. This helps you see what’s driving the profit—sales, efficiency, or borrowing.
This calculator is great for real-life decisions, like checking business health, planning growth, or comparing companies. It’s reliable for important financial choices, like investing or improving operations. Want to know how it’s calculated? Let’s check out the formula next.
Formula for DuPont Calculator
The DuPont formula calculates ROE in steps:
Net Profit Margin (%) = (Net Income / Sales) × 100
Total Asset Turnover (%) = (Sales / Total Assets) × 100
Financial Leverage (%) = (Total Assets / Total Equity) × 100
Return on Equity (ROE) (%) = Net Profit Margin (%) × Total Asset Turnover (%) × Financial Leverage (%) / 10000
Where:
- Sales = Total revenue (money from selling goods or services)
- Net Income = Profit after all expenses and taxes
- Total Assets = Everything the company owns
- Total Equity = Money from shareholders
This formula comes from financial analysis standards. The final division by 10,000 adjusts the percentages into a single ROE percentage. Now, let’s make it easier with a table.
Quick Reference Table for DuPont Formula
Why calculate every time? This table explains what typical ROE values mean. It’s a fast way to understand results.
| ROE (%) | Meaning |
|---|---|
| 0-10 | Low return—needs improvement |
| 10-20 | Average return—decent performance |
| 20+ | High return—strong business |
How to Use the Table
- Find your ROE percentage.
- Check what it says about the business.
- Use it to plan next steps.
This table helps with searches like “what’s a good ROE.” For exact results, use the formula. Next, let’s try an example.
Example: Calculating DuPont Formula
Suppose a company has:
- Sales = $500,000
- Net Income = $50,000
- Total Assets = $250,000
- Total Equity = $100,000
You want to find the ROE. Here’s how to do it:
- Calculate Net Profit Margin:
Net Profit Margin (%) = (50,000 / 500,000) × 100 = 10% - Calculate Total Asset Turnover:
Total Asset Turnover (%) = (500,000 / 250,000) × 100 = 200% - Calculate Financial Leverage:
Financial Leverage (%) = (250,000 / 100,000) × 100 = 250% - Find ROE:
ROE (%) = 10 × 200 × 250 / 10000 = 5,000 / 10,000 = 50%
So, the ROE is 50%, showing a strong return. This matches financial analysis norms and highlights efficiency and leverage.
Most Common FAQs
It breaks down ROE to show what’s working—profit, asset use, or borrowing—so you can improve.
Above 15-20% is good for most industries, but it depends on the business type.
Yes, any company with sales, income, assets, and equity data can use it to check performance.