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Chapter 1 8 Du Pont System Of Ratio Analysis 1 8 . 1 Basics Problem. A company's Net Profit is $ 1 7 0 ,
Chapter Du Pont System Of Ratio Analysis
Basics
Problem. A company's Net Profit is $ Pretax Profit is $ EBIT is $ Sales are $ Assets are $ and Equity is $ Calculate the company's ROE and decompose the ROE into its components using the Du Pont System.
FIGURE Excel Model of Du Pont System of Ratio Analysis Basics.
The ROE The decomposition helps us see where this comes from. Here is an intuitive interpretation of the components:
Net Profit Pretax is a taxburden ratio.
Pretax Profits EBIT is an interestburden ratio.
EBIT Sales is the profit margin.
Sales Assets is the asset turnover.
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