# What is the DuPont analysis and how does it aid in financial analysis?

**DuPont Analysis, and how does it aid in financial analysis**?

**DuPont analysis**relates return on assets to turnover and margin. It allows for further

**analysis**of return on assets by this breakdown. Operating assets are basically current assets plus plant, property, and equipment.

Herein, what is DuPont analysis explain?

The **Dupont analysis** also called the **Dupont** model is a financial ratio based on the return on equity ratio that is used to analyze a company's ability to increase its return on equity. In other words, this model breaks down the return on equity ratio to **explain** how companies can increase their return for investors.

Furthermore, what does the DuPont identity tell you? The **DuPont identity** is an expression that shows a company's return on equity (ROE) can be represented as a product of three other ratios: the profit margin, the total asset turnover, and the equity multiplier.

In respect to this, how is the DuPont system helpful to the analyst?

5.4 The Du Pont **System helps** the **analyst** see how the firm's decisions and activities over the course of an accounting period interact to produce an overall return to the firm's shareholders. By reviewing the relationships of a series of financial ratios, the **analyst** can identify strengths and weaknesses.

How is DuPont analysis calculated?

The **DuPont Equation**: In the **DuPont equation**, ROE is equal to profit margin multiplied by asset turnover multiplied by financial leverage. Under **DuPont analysis**, return on equity is equal to the profit margin multiplied by asset turnover multiplied by financial leverage.