What are the components of the DuPont model and how are they calculated?

4 years ago
Financial Management

Asset turnover ratio, financial leverage, and net profit margin are the main aspects of the DuPont model. With these, a company’s return on equity (ROE) is evaluated. 

  • Net Profit Margin is calculated with the following steps:

         Profit Margin = Net Income /Revenue

  • The formula for calculating the Asset Turnover Ratio is:

         Asset Turnover Ratio = Net Sales (or Revenue) / Average Assets

  • Financial Leverage is calculated by:

        Financial leverage = Average Assets / Average Equity

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Sanisha Maharjan
Sanisha Maharjan
Jan 18, 2022
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