DU PONT ANALYSIS

submitted to:

Prof. Chitra Potdar

GROUP MEMBERS Punitpal Singh Anand 02

Rameet Gulati 19

Gurmeet Singh Anand 40

Harsh Sampat 48

Uppal Nanak 56

Foram Vasa 57

Financial ratio analysis

Financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company's financial statements. The level and historical trends of these ratios can be used to make inferences about a company's financial condition, its operations and attractiveness as an investment.

Importance of financial ratios

What is the DuPont Model?

The DuPont Model is a technique that can be used to analyze the profitability of a company using traditional performance management tools. To enable this, the DuPont model integrates elements of the Income Statement with those of the Balance Sheet.

History

Made by F. Donaldson Brown

This was perhaps the first large-scale reengineering effort

in USA

Three Steps Of DuPont Analysis

DuPont method is an expression which breaks ROE

(Return on Equity) into three parts.

Operating efficiency (measured by profit margin)

Asset use efficiency (measured by asset turnover)

Financial leverage (measured by equity multiplier)

R.O.E equation= net income/ shareholders equity

R.O.E=(net income/sales) * (sales / share holders equity)

R.E.O=(net income /sales) * (sales /asset)* (assets /

shareholders equity)

Du Pont Analysis 

DuPont Analysis

Practical Application

Atlantic Aquatic Equipment, Inc. Balance Sheet & Income Statement

Financial Analysis with the DuPont Ratio

Financial Analysis and the Changing Role of Credit Professionals

The DuPont financial analysis model

Financial analysis using the DuPont model :

Profitability

Activity

ROCE - Return on capital employed

The DuPont model financial components are discussed below:

Income Statement Balance sheet ROCE

Performance measure is: x Profitability

Performance measure is: = Activity

Profitability x Activity

Limitations of the DuPont model for financial analysis

It is a short term measurement. It is a before tax measurement. Setting a target for a good ROCE is difficult. It does not link to the cost of capital. It does not link to the time value of money. It does not link to value.

DuPont Analysis of Telecom Companies

Bharti Airtel

MTNL

Idea Cellular Limited

VSNL

Usage of the DuPont Framework

Steps in the DuPont Method (Process)

Strengths

Limitations

Assumptions

Case study on state bank of India

Profit and Loss Account and Balance Sheet of State Bank of India

DuPont chart Financial Statement Analysis

DuPont chart Financial Statement Analysis of State Bank of India

THANK YOU