Roe Equation Dupont. In the dupont equation roe is equal to profit margin multiplied by asset turnover multiplied by financial leverage. Or dupont roe net income revenues revenues total assets total assets shareholders equity.
The dupont roe is calculated by multiplying the net profit margin asset ratio and equity multiplier together. Return on equity profit margin total asset turnover leverage factor. From the three step equation we saw that in general rises in the net profit margin asset turnover and leverage.
By splitting roe return on equity into three parts companies can more easily understand changes in their roe over time.
The following is the roe equation. Under dupont analysis return on equity is equal to the profit margin multiplied by asset turnover multiplied by financial leverage. Or dupont roe 50 000 300 000 300 000 900 000 900 000 150 000. The return on equity roe metric is net income divided by shareholders equity.
