About the DuPont Analysis Calculator
This DuPont analysis calculator takes six figures from an income statement and balance sheet and explains where a company’s return on equity (ROE) comes from. The 3-step model splits ROE into net profit margin, asset turnover and the equity multiplier; the 5-step model goes further and separates the net margin into tax burden, interest burden and operating (EBIT) margin.
It is built for equity analysts, accounting and finance students, lenders and owners who want to compare two companies with similar ROE but very different business models — a thin-margin, high-turnover retailer versus a high-margin, asset-heavy manufacturer, or a business that is simply borrowing heavily. Each ratio multiplies back to exactly the same ROE, so you can see which lever is doing the work.
For the most accurate result use the same fiscal year for every figure and average balance-sheet values (opening plus closing, divided by two). Pre-tax income is earnings before tax (EBT) and EBIT is operating income before interest and tax.
With the default inputs, the return on equity (roe) is 30.47%. Change any value above to recalculate instantly.
How to use the dupont analysis calculator
- 1Enter revenue, EBIT, pre-tax income and net income from the income statement.
- 2Enter average total assets and average shareholders’ equity from the balance sheet.
- 3Read ROE and the three 3-step components.
- 4Use the tax burden, interest burden and EBIT margin to see the 5-step detail.
- 5Compare the components with a competitor or with last year to find what changed.
Formula and method
The DuPont identity rewrites ROE (net income ÷ equity) as a product of ratios whose intermediate terms cancel. In the 3-step version, revenue and assets appear in both a numerator and a denominator, so net margin × asset turnover × equity multiplier is exactly net income ÷ equity. Margin measures profitability, turnover measures efficiency and the multiplier measures financial leverage.
The 5-step (extended) version splits net margin into three parts: the tax burden (how much pre-tax profit survives tax), the interest burden (how much operating profit survives interest) and the EBIT margin (operating profitability). A falling interest burden with rising leverage, for example, shows that extra debt is costing more in interest than it is adding to returns. Average balance-sheet figures are recommended because income is earned over the whole year.
- NI
- Net income
- EBT
- Earnings before tax (pre-tax income)
- EBIT
- Earnings before interest and tax (operating income)
- Assets
- Average total assets
- Equity
- Average shareholders’ equity
Worked examples
Manufacturer with moderate leverage
Net income of $487,500 on $1.6M equity is a 30.47% ROE. 3-step: 9.75% margin × 1.25 turnover × 2.5 multiplier. 5-step: 0.75 tax burden × 0.867 interest burden × 15% EBIT margin gives the same 9.75% net margin.
Low-margin retailer
A 4.4% net margin looks weak, but assets turn over 2.5 times a year. With only a 1.6× multiplier, ROE still reaches 17.6% — efficiency, not leverage, is driving returns.
Highly leveraged company
ROE of 25% looks attractive, but the equity multiplier is 5× and the interest burden is just 0.40 — interest eats 60% of operating profit. ROA is only 5%, so the return depends heavily on debt.
Frequently asked questions
What is the difference between 3-step and 5-step DuPont analysis?+
The 3-step model splits ROE into net margin, asset turnover and equity multiplier. The 5-step model breaks net margin into tax burden, interest burden and EBIT margin, separating operating performance from financing and tax effects.
Why does DuPont analysis matter if it gives the same ROE?+
Because it shows why ROE is high or low. Two firms with a 20% ROE may get there through high margins, fast asset turnover or heavy debt, and each has a very different risk profile and outlook.
Should I use average or year-end balance sheet figures?+
Average total assets and average equity (opening plus closing, divided by two) are preferred because net income is earned across the whole year. Year-end figures are fine for a quick comparison if balances changed little.
What does an equity multiplier of 3 mean?+
Assets are three times equity, so about two-thirds of assets are financed by liabilities. Higher multipliers boost ROE when the business is profitable but magnify losses and raise financial risk.
Can the interest burden be greater than 1?+
Yes, if non-operating income (such as interest earned on cash) exceeds interest expense, EBT can be higher than EBIT and the ratio exceeds 1. For most borrowing companies it sits between 0 and 1.
Who created DuPont analysis?+
The method was developed at the DuPont chemical company in the early twentieth century, credited to F. Donaldson Brown, as a way to evaluate the performance of different business units.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.