DuPont Analysis — ROE Decomposition
ROE = Net Margin × Asset Turnover × Equity Multiplier. Understanding which driver dominates reveals business quality.
Interactive — drag sliders to see ROE impact
Three ways to build high ROE:
(1) High net margin — pricing power, lean cost structure. Most durable.
(2) High asset turnover — efficient use of assets. Common in retail/manufacturing.
(3) High equity multiplier (leverage) — borrowed money amplifies returns but also amplifies losses.
DuPont analysis is an educational tool. It explains the source of ROE — not whether the stock is a good investment.