ROE DuPont Analysis Calculator
Break return on equity into profit margin, asset turnover, and equity multiplier using your company figures, then check it against direct ROE.
How the DuPont calculation works
Enter net income and revenue for the same reporting period, plus total assets and shareholder equity measured on the same balance sheet basis. The calculator computes net profit margin, asset turnover, and the equity multiplier, then multiplies them to derive ROE when all three components are defined.
For positive revenue, assets, and equity, the product simplifies to net income divided by equity. The direct calculation is shown as a check. If a denominator is zero, the affected ratio is unavailable rather than treated as zero. Direct ROE can still be shown when equity is nonzero, but negative equity falls outside the conventional DuPont interpretation.
Choose either period end balances or averages for assets and equity according to your analysis, and use that convention consistently. The tool does not calculate averages, normalize earnings, adjust accounting statements, or compare a company with peers.
Change one input at a time to see how the ratios respond. Use figures from the same reporting currency and accounting basis. The calculator does not convert currencies or verify the figures against company filings.
Step by step
- Enter net income and revenue for the same period.
- Enter total assets and shareholder equity using the same balance convention.
- Review the three components and compare their product with direct ROE.
Worked example
Suppose a company reports net income of $1,000,000, revenue of $10,000,000, total assets of $5,000,000, and shareholder equity of $2,000,000. The income and revenue cover the same period; assets and equity use the same balance sheet convention.
Net profit margin is 10%, asset turnover is 2.00, and the equity multiplier is 2.50. Their product is 50% ROE. Direct ROE, $1,000,000 divided by $2,000,000, is also 50%. The matching result checks the identity for these inputs; it does not establish that the return is sustainable.
When to use this calculator
Use the calculation to explain how entered net income, revenue, assets, and equity combine into ROE for a reporting period. It can help organize a historical comparison when the same accounting definitions are used.
Use other analysis for valuation, cash flow, debt capacity, or future performance. This ratio breakdown alone cannot answer those questions.
Common input checks
Match net income and revenue to the same period. Choose a consistent balance convention for assets and equity, and confirm that all amounts use the same currency and units.
Do not read an unavailable ratio as zero. A zero denominator makes the affected component undefined, while negative equity prevents the conventional DuPont interpretation. Check the source figures before comparing results.
Formula
Net profit margin = net income / revenue
Asset turnover = revenue / total assets
Equity multiplier = total assets / shareholder equity
DuPont ROE = net profit margin × asset turnover × equity multiplier
Direct ROE = net income / shareholder equity
The flow figures net income and revenue should cover the same period. Total assets and shareholder equity should use the same balance sheet convention, such as period end or period average. A zero denominator makes that ratio undefined. Negative equity makes the conventional DuPont breakdown inapplicable; the direct ratio is shown separately when it can be calculated.
Limitations and assumptions
This is an arithmetic breakdown of user supplied accounting figures. It does not verify filings, adjust one time items, derive average balances, convert currencies, model taxes, or forecast returns. Comparisons can mislead when reporting periods, accounting policies, or balance conventions differ. The factors describe the inputs and do not grade a company or recommend an action.
Key terms
- Net profit margin
- Net income for a period divided by revenue for the same period.
- Asset turnover
- Revenue for a period divided by the asset balance chosen for that period.
- Equity multiplier
- Total assets divided by shareholder equity using the same balance sheet convention.
Related analysis
Compare the ROE components with the cost of equity or with results from another period. A DuPont breakdown explains the arithmetic behind ROE, but it does not value a company or estimate future returns.
The WACC Calculator models a financing rate, while this tool uses income and balance sheet figures to calculate historical ROE. Keep the periods and accounting definitions consistent when comparing results.
FAQ
How is DuPont ROE calculated?
It multiplies net profit margin by asset turnover and by the equity multiplier. With positive denominators, the product equals net income divided by shareholder equity. Each ratio uses the income statement and balance sheet figures you enter.
What does each component measure?
Net profit margin is net income divided by revenue. Asset turnover is revenue divided by total assets. The equity multiplier is total assets divided by shareholder equity. The first two use period flows and balance amounts; their inputs must be defined consistently.
Which balance sheet values should I enter?
Use total assets and shareholder equity measured on the same basis. You may choose period end balances or averages for the period, but this calculator does not derive average balances. Use the same convention when comparing companies or periods.
Why can direct ROE appear without a DuPont breakdown?
Direct ROE is net income divided by equity. It can be calculated when equity is nonzero even if revenue or assets are zero and one or more components are undefined. With zero equity, direct ROE is undefined. Negative equity also makes the conventional three component interpretation inapplicable, even though the arithmetic ratio can still be displayed.
Can ROE be negative?
Yes. Negative net income with positive revenue and equity produces negative ROE. The result describes the entered period and definitions. It is not a forecast or a judgment about future performance.
Related tools
Use the WACC Calculator to examine a financing rate separately from historical ROE. Keep both tools' periods and definitions clear; neither calculation by itself establishes company value or future performance.