Business Tools for Career Readiness

Finance for
Non-Financial Professionals
Module 3

with David Standen, D.B.A.

DuPont Pyramid
DuPont analysis tells us that ROE
is affected by three things:

DuPont Pyramid
DuPont analysis tells us that ROE
is affected by three things:

1. Operating efficiency (measured by Profit Margin)

DuPont Pyramid:

Profit Margin

Profit Margin =

Profit
Sales

DuPont Pyramid
DuPont analysis tells us that ROE
is affected by three things:

1. Operating efficiency (measured by Profit Margin)

2. Asset use efficiency (measured by Total Asset
Turnover)

DuPont Pyramid:

Total Asset Turnover

Amount of sales or revenues generated per

dollar of assets
Total Asset
Turnover

Sales or Revenues
Assets

DuPont Pyramid:

Total Asset Turnover

Amount of sales or revenues generated per

dollar of assets
Total Asset
Turnover

Sales or Revenues
Assets

Indicator of the efficiency with which a company is

deploying its assets.
The higher the ratio, the better, since this implies the
company is generating more revenues per dollar of
assets

DuPont Pyramid
DuPont analysis tells us that ROE
is affected by three things:

1. Operating efficiency (measured by Profit Margin)

2. Asset use efficiency (measured by Total Asset
Turnover)

3. Financial leverage (measured by the Equity

Multiplier)

DuPont Pyramid:

The Equity Multiplier

Measurement of a companys financial leverage

The Equity
Multiplier

Assets
Equity

A high equity multiplier indicates that a larger portion

of asset financing is being done through debt
The multiplier is a variation of the debt ratio

DuPont Pyramid
DuPont analysis tells us that ROE
is affected by three things:

1. Operating efficiency (measured by Profit Margin)

2. Asset use efficiency (measured by Total Asset
Turnover)

3. Financial leverage (measured by the Equity

Multiplier)