## Answers the Question

What is the rate of return on an investment?

## Calculator for DuPont Analysis

## What Is the DuPont Analysis?

This formula is used for calculating return on equity for investors.

The formula was first used at the DuPont Corporation (hence the name).

Also known as:

- The DuPont equation
- The DuPont identity
- The DuPont Method

## Why Is it Important?

- Understanding the return on equity for a firm will help demonstrate difference in performance of one firm compared to a close competitor.
- It will also clue managers in as to whether there is likely inefficiency that must be corrected.

## Formula(s) to Calculate DuPont Analysis

- RETURN ON EQUITY = ( NET PROFIT / SALES ) * ( SALES / AVERAGE TOTAL ASSETS ) * ( AVERAGE TOTAL ASSETS / AVERAGE EQUITY )

## Common Mistakes

- Assuming that all industries should share similar returns on equity.