What is a good Return on Equity (ROE)?

An ROE between 15% and 20% is widely regarded as strong across major equity markets (such as the S&P 500 average of ~14%). High-performing technology and capital-light service firms often achieve ROEs above 25%.

Why is DuPont analysis important for evaluating ROE?

DuPont analysis reveals how a company generates its ROE. High ROE can stem from genuine operational excellence (high margins or efficient asset turnover) or artificially inflated leverage (excessive debt). DuPont separates these drivers to protect investors from over-leveraged businesses.

DuPont Analysis & Shareholder Value

Return on Equity (ROE) Calculator

Compute shareholder Return on Equity (ROE %), Return on Assets (ROA %), and deconstruct returns using the 3-step DuPont analysis formula to verify operating quality.

Financial Statement Inputs

Annual Net Income ($)

Shareholders' Equity ($)

Total Net Sales / Revenue ($)

Total Assets ($)

Top Decile Capital Efficiency

Return on Equity (ROE)

21.5%

$140,000 net income / $650,000 equity

Return on Assets (ROA)

12.7%

asset productive yield

3-Step DuPont Factor Breakdown

1. Profit Margin

11.2%

NI / Sales

2. Asset Turnover

1.14x

Sales / Assets

3. Leverage

1.69x

Assets / Equity

DuPont Insight: Exceptional shareholder value creation with strong underlying operating margins.

DuPont Analysis Mathematical Architecture

The 3-Step DuPont Equation

ROE = (Net Income / Sales) × (Sales / Assets) × (Assets / Equity)

ROE = Net Profit Margin × Asset Turnover × Equity Multiplier

By multiplying these 3 factors, intermediate variables cancel out, proving that ROE is driven by profitability, efficiency, and leverage.

Why DuPont Matters to Founders & Investors

Two companies can both report a 25% ROE. Company A achieves it through high profit margins (30%) with zero debt. Company B achieves it through razor-thin margins (2%) inflated by massive debt leverage. DuPont protects equity holders from misleading leverage traps.

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