DuPont ROE Calculator
The DuPont analysis breaks return on equity (ROE) into three distinct drivers: profitability (net profit margin), efficiency (asset turnover), and leverage (equity multiplier). This decomposition is invaluable for identifying the root cause of changes in ROE. A competitor with the same ROE but different underlying drivers presents an entirely different risk and improvement profile. Financial analysts, equity researchers, and business executives use DuPont analysis to pinpoint where performance improvements or risks are concentrated.
DuPont ROE formula
Net Profit Margin = Net Income / Revenue
Asset Turnover = Revenue / Total Assets
Equity Multiplier = Total Assets / Shareholders' Equity
ROE = Net Profit Margin * Asset Turnover * Equity Multiplier
Example: Net Income $150,000, Revenue $1,500,000, Total Assets $1,000,000, Equity $500,000. Margin = 10.00%. Turnover = 1.50. Multiplier = 2.00. ROE = 10% * 1.50 * 2.00 = 30.00%.
Using DuPont analysis to drive improvement
- Low net profit margin: focus on cost reduction or pricing power.
- Low asset turnover: investigate underutilised assets, excess inventory, or slow receivable collection.
- High equity multiplier: the business relies heavily on debt. While it boosts ROE in good times, it increases financial risk during downturns.
- Compare your three components to industry averages to identify your specific competitive gap.
Frequently asked questions
What is the DuPont analysis?
DuPont analysis decomposes return on equity (ROE) into three components: net profit margin (profitability), asset turnover (efficiency), and the equity multiplier (financial leverage). This reveals which driver is responsible for a high or low ROE.
What is the DuPont ROE formula?
ROE = Net Profit Margin * Asset Turnover * Equity Multiplier. Equivalently: ROE = (Net Income / Revenue) * (Revenue / Total Assets) * (Total Assets / Shareholders' Equity). The simplified form is ROE = Net Income / Shareholders' Equity.
Why use DuPont instead of basic ROE?
Basic ROE only tells you the result. DuPont tells you why ROE is high or low. A business can achieve high ROE through superior profitability, efficient use of assets, or aggressive use of leverage. Each has different risk implications.
What is the equity multiplier?
The equity multiplier is Total Assets / Shareholders' Equity. It reflects financial leverage: a higher multiplier means the business uses more debt to finance assets. A multiplier of 2 means half of assets are financed by equity and half by debt.
What is a good ROE?
A ROE above 15% is often considered strong, though this varies by industry. Highly leveraged industries like banking often show higher ROE. Compare ROE over time and against industry peers for the most meaningful interpretation.
Official sources
- SEC: EDGAR Financial Filings.
- FASB: Accounting Standards Codification.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.