DuPont Analysis Calculator

Break Return on Equity into its three drivers — net profit margin, asset turnover, and financial leverage — using the standard three-step DuPont formula.

Quick Facts

Formula
ROE = Net Profit Margin x Asset Turnover x Equity Multiplier
Net Profit Margin = Net Income / Revenue; Asset Turnover = Revenue / Total Assets; Equity Multiplier = Total Assets / Total Equity.
Origin
Developed at DuPont in the 1920s
Used to see whether ROE is driven by profitability, efficiency, or leverage.

Your Results

Calculated
Return on equity (ROE)
-
Net income / total equity
Net profit margin
-
Net income / revenue
Asset turnover
-
Revenue / total assets
Equity multiplier
-
Total assets / total equity (leverage)

Ready

Enter net income, revenue, total assets, and total equity, then press Calculate.

How the DuPont Analysis Calculator works

DuPont Analysis decomposes Return on Equity (ROE) into three multiplicative components so you can see what is actually driving a company's returns: profitability, asset efficiency, or financial leverage. It was developed at the DuPont Corporation in the 1920s to move beyond a single ROE number and expose the mechanics behind it.

The formula

The three-step (standard) DuPont formula is:

ROE = Net Profit Margin × Asset Turnover × Equity Multiplier

where each component is itself a ratio:

  • Net Profit Margin = Net Income / Revenue — how much profit is kept from each dollar of sales.
  • Asset Turnover = Revenue / Total Assets — how efficiently the asset base generates revenue.
  • Equity Multiplier = Total Assets / Total Equity — how much of the assets are financed by debt versus equity (financial leverage).

Multiplying the three together cancels the Revenue and Total Assets terms algebraically, leaving ROE = Net Income / Total Equity — the same figure a single-ratio ROE calculation would give, but now split into its three underlying causes.

Worked example

Take a company with $120,000 net income, $1,500,000 revenue, $900,000 total assets, and $400,000 total equity. Net profit margin is $120,000 / $1,500,000 = 8.00%. Asset turnover is $1,500,000 / $900,000 = 1.67x. The equity multiplier is $900,000 / $400,000 = 2.25x. Multiplying the three: 0.08 × 1.67 × 2.25 = 30.00% ROE, which matches $120,000 / $400,000 directly.

Reading the three drivers

  • Net profit margin reflects pricing power and cost control. A low margin with strong ROE usually means the business is leaning on turnover or leverage instead.
  • Asset turnover reflects operational efficiency. Retailers and grocers typically post high turnover with thin margins; capital-intensive businesses like utilities post the opposite.
  • Equity multiplier reflects capital structure. A higher multiplier means more debt relative to equity — it can lift ROE, but it also means fixed interest obligations regardless of how the business performs, so higher leverage is not automatically a positive signal.

Why decompose ROE at all

Two companies can post an identical ROE for very different reasons. Comparing the three components separately — rather than the single ROE figure — shows whether an improving or declining ROE is being driven by better (or worse) profitability, more (or less) efficient use of assets, or a change in leverage. That distinction matters because margin and efficiency gains are generally more durable than gains produced purely by taking on more debt.

Extending the model

Analysts sometimes split net profit margin further into a five-step DuPont model (tax burden, interest burden, and operating margin) to isolate the effect of taxes and interest expense separately. This calculator uses the standard three-step version, which is the most widely taught and applied form of the analysis.

Frequently Asked Questions

What is the DuPont Analysis formula?
The three-step DuPont formula breaks Return on Equity into three drivers: ROE = Net Profit Margin x Asset Turnover x Equity Multiplier, where Net Profit Margin = Net Income / Revenue, Asset Turnover = Revenue / Total Assets, and Equity Multiplier = Total Assets / Total Equity. The three ratios multiply together to equal Net Income / Total Equity.
What do the three DuPont components mean?
Net Profit Margin shows how much profit is kept from each dollar of revenue. Asset Turnover shows how efficiently assets generate revenue. Equity Multiplier shows how much of the asset base is funded by debt versus equity (financial leverage). A given ROE can come from strong profitability, efficient asset use, high leverage, or some mix of the three.
Why can two companies have the same ROE for different reasons?
Because ROE is a product of three ratios, the same result can come from very different underlying businesses. A software company might post a high ROE mostly through a wide profit margin, while a retailer with thin margins might reach the same ROE through fast asset turnover, and a bank might rely heavily on leverage (a high equity multiplier). Comparing the three components separately shows which path each company took.
Is a higher equity multiplier always better?
Not necessarily. A higher equity multiplier means more assets are financed with debt relative to equity, which can boost ROE but also increases financial risk, since interest payments are fixed regardless of how the business performs. An ROE increase driven mainly by rising leverage rather than better margins or turnover is generally considered lower quality.

Related calculators