Breaking Down ROE Using the DuPont Formula
نویسنده
چکیده
ing earnings for shareholders. Return on equity measures net income less preferred dividends against total stockholder’s equity. The three primary drivers of ROE are better sales (or turnover), greater margins and higher debt levels, each of which can lead to a higher ROE. Although return on equity is a useful tool, it does not tell you what factors are helping or hurting the company’s performance. The DuPont formula addresses this concern by breaking down ROE and allowing investors to see which characteristics are driving ROE. Analysis of the DuPont formula allows you to determine whether management is generating value for shareholders effectively.
منابع مشابه
Determinants of the Return on Equity Ratio (roe) on the Example of Companies from Metallurgy and Mining Sector in Poland
A. Kijewska, The Silesian University of Technology, Faculty of Mining and Geology, Gliwice, Poland The purpose of this article is to present the possibilities of analyzing popular among investors ratio of ROE and identification the determinants of its growth or decline. Traditionally, according to the DuPont formula three indicators are presented as the primary determinants of ROE. The paper sh...
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