Du Pont Analysis
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DU PONT ANALYSIS The Du Pont Company of the US developed a system of financial analysis which has got good recognition and acceptance. Analyzing return ratios in terms of profit margin and turnover ratios, it is referred as the Du Pont System. It integrates elements of the income statement with those of balance sheet. DuPont analysis tells us that ROE is affected by three things: • Operating efficiency, which is measured by profit margin • Asset use efficiency, which is measured by total asset turnover • Financial leverage, which is measured by the equity multiplier ROE = Profit Margin (Profit/Sales) * Total Asset Turnover (Sales/Assets) * Equity Multiplier (Assets/Equity If ROE is unsatisfactory, the DuPont analysis helps locate the part of the business that is underperforming. Steps in DuPont Analysis: 1. Collect the data 2. Calculate the required ratios (using spreadsheet) 3. Draw conclusions 4. If conclusions are unrealistic, calculate again and check for the authenticity of the data In the Dupont Analysis we try to find out what are the factors/drivers that are causing the profits to move up. By identifying these factors/drivers we can concentrate on them and improve our efficiency.
Profit and loss account Year
2008
2007
2006
2005
2004
364.6 612.8 689.3 6 6 4 4.96 5.69 18.55 607.1 670.7 359.7 7 9 10.41 12.31 13.57 -10.8 6 17.81 -1.14 359.2 637.2 683.2 5 9 2
585.2 5 18.44 566.8 1 7.24
548.3 7 18.44 529.9 3 13.82
12.03 586.0 8
4.3 548.0 5
224.4 414.0 421.1 347.1 8 3 4 9 2.99 4.52 12.24 8.67 23.97 31.8 31.02 37.67 17.07 31.52 42.06 43.49
322.8 1 7.67 34.06 39.89
49.74 77.59 73.5 88.15 8.32 6.56 27.89 13.99
76.73 22.25
0 0 0 0.47 326.5 566.0 607.8 538.6 7 2 5 9 32.68 71.27 75.37 47.39 9.02 10.2 13.47 12.59 23.66 61.07 61.9 34.8
0 503.4 1 44.64 10.99 33.65
INCOME : Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure Operating Profit Interest Gross Profit
Depreciation Profit Before Tax Tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit Adjst. below Net Profit P & L Balance brought forward Statutory Appropriations Appropriations P & L Balance carried down Dividend Preference Dividend
6.26 6.66 9.16 9.79 17.4 54.41 52.74 25.01 2.84 9.86 12.57 7.78 0.41 0.4 -0.23 0.86 13.72 43.61 39.63 16.36 -2.11 2.46 -2.42 -0.4 15.83 41.15 42.05 16.76 2.68 -2.52 -0.78 -0.63 -34.0 21.63 25.02 -6.37 1 0 0 0 0 7.61 8.52 4.89 17.53 -35.8 30.42 57.59 27.59 1 3.01 3.08 4.17 4.05 0 0 0 0
9.18 24.47 7.07 -0.05 17.45 1.42 16.03 -0.1 -53.2 6 0 13.04 -48.9 5 2.46 2.05
Aggregate Balance sheet Year SOURCES OF FUNDS :
2008
Share Capital
Total Shareholders Funds
36.77 159.0 4 195.8 1
Secured Loans Unsecured Loans
77.96 12.54
Total Debt
Reserves Total
Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Net Block Lease Adjustment Capital Work in Progress
2007
2006 236.5 7 179.1 3
90.5 286.3 1
229.1 8 233.8 6 463.0 4 119.5 6 15.47 135.0 3 598.0 7
146.5 7 31.81 114.7 6 0 17.15
145.3 39.88 105.4 2 0 63.48
415.7 103.3 6 20.87 124.2 3 539.9 3 180.0 6 56.11 123.9 5 0 26.24
2005
2004
227.2
245.3 3
94.29 321.4 9
79.25 324.5 8
89.08 64.4 153.4 8 474.9 7
89.84 33.73 123.5 7 448.1 5
205.9 1 54.53 151.3 8 0 10.9
193.7 6 60.58 133.1 8 0 3.01
Investments Current Assets, Loans & Advances
18.15
163.9 9
156.4 8 136.7 7 126.4 8 53.93 105.9 8 423.1 6
156.6
152.1 2
119.2 3
102.3 4
88.77 19.28
96.46 25.15
81.09 308.3 7
80.24 304.1 9
Inventories
51.99
Sundry Debtors Cash and Bank
50.03 45.15
Loans and Advances
93.21 240.3 8
119.3 8 109.4 7 65.89 117.2 4 411.9 8
69.5 32.21 101.7 1 138.6 7
117.7 6 31.29 149.0 5 262.9 3
155.4 2 37.11 192.5 3 230.6 3
139.4 23.21 162.6 1 145.7 6
138.7 1 19.24 157.9 5 146.2 4
1.11 2.1 5.63 -3.53 286.3 1
5.77 1.3 4.82 -3.52 598.0 7
7.26 2.27 6.9 -4.63 539.9 3
15.25 1.46 6.38 -4.92 474.9 7
17.82 1.74 5.96 -4.22 448.1 5
Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Total Assets
Profit and loss account Year
2008
2007
2006
2005
2004
364.6 612.8 689.3 6 6 4 4.96 5.69 18.55 607.1 670.7 359.7 7 9 10.41 12.31 13.57 -10.8 6 17.81 -1.14 359.2 637.2 683.2 5 9 2
585.2 5 18.44 566.8 1 7.24
548.3 7 18.44 529.9 3 13.82
12.03 586.0 8
4.3 548.0 5
224.4 414.0 421.1 347.1 8 3 4 9 2.99 4.52 12.24 8.67 23.97 31.8 31.02 37.67 17.07 31.52 42.06 43.49
322.8 1 7.67 34.06 39.89
49.74 77.59 73.5 88.15 8.32 6.56 27.89 13.99
76.73 22.25
0 0 0 0.47 326.5 566.0 607.8 538.6 7 2 5 9 32.68 71.27 75.37 47.39 9.02 10.2 13.47 12.59 23.66 61.07 61.9 34.8
0 503.4 1 44.64 10.99 33.65
INCOME : Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income EXPENDITURE : Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Administration Expenses Miscellaneous Expenses Less: Pre-operative Expenses Capitalised Total Expenditure Operating Profit Interest Gross Profit
Depreciation Profit Before Tax Tax Deferred Tax Reported Net Profit Extraordinary Items Adjusted Net Profit Adjst. below Net Profit P & L Balance brought forward Statutory Appropriations Appropriations P & L Balance carried down Dividend Preference Dividend
6.26 6.66 9.16 9.79 17.4 54.41 52.74 25.01 2.84 9.86 12.57 7.78 0.41 0.4 -0.23 0.86 13.72 43.61 39.63 16.36 -2.11 2.46 -2.42 -0.4 15.83 41.15 42.05 16.76 2.68 -2.52 -0.78 -0.63 -34.0 21.63 25.02 -6.37 1 0 0 0 0 7.61 8.52 4.89 17.53 -35.8 30.42 57.59 27.59 1 3.01 3.08 4.17 4.05 0 0 0 0
9.18 24.47 7.07 -0.05 17.45 1.42 16.03 -0.1 -53.2 6 0 13.04 -48.9 5 2.46 2.05
Aggregate Balance sheet Year SOURCES OF FUNDS :
2008
Share Capital
Total Shareholders Funds
36.77 159.0 4 195.8 1
Secured Loans Unsecured Loans
77.96 12.54
Total Debt
Reserves Total
Total Liabilities APPLICATION OF FUNDS : Gross Block Less : Accumulated Depreciation Net Block Lease Adjustment Capital Work in Progress
2007
2006 236.5 7 179.1 3
90.5 286.3 1
229.1 8 233.8 6 463.0 4 119.5 6 15.47 135.0 3 598.0 7
146.5 7 31.81 114.7 6 0 17.15
145.3 39.88 105.4 2 0 63.48
415.7 103.3 6 20.87 124.2 3 539.9 3 180.0 6 56.11 123.9 5 0 26.24
2005
2004
227.2
245.3 3
94.29 321.4 9
79.25 324.5 8
89.08 64.4 153.4 8 474.9 7
89.84 33.73 123.5 7 448.1 5
205.9 1 54.53 151.3 8 0 10.9
193.7 6 60.58 133.1 8 0 3.01
Investments Current Assets, Loans & Advances
18.15
163.9 9
156.4 8 136.7 7 126.4 8 53.93 105.9 8 423.1 6
156.6
152.1 2
119.2 3
102.3 4
88.77 19.28
96.46 25.15
81.09 308.3 7
80.24 304.1 9
Inventories
51.99
Sundry Debtors Cash and Bank
50.03 45.15
Loans and Advances
93.21 240.3 8
119.3 8 109.4 7 65.89 117.2 4 411.9 8
69.5 32.21 101.7 1 138.6 7
117.7 6 31.29 149.0 5 262.9 3
155.4 2 37.11 192.5 3 230.6 3
139.4 23.21 162.6 1 145.7 6
138.7 1 19.24 157.9 5 146.2 4
1.11 2.1 5.63 -3.53 286.3 1
5.77 1.3 4.82 -3.52 598.0 7
7.26 2.27 6.9 -4.63 539.9 3
15.25 1.46 6.38 -4.92 474.9 7
17.82 1.74 5.96 -4.22 448.1 5
Total Current Assets Less : Current Liabilities and Provisions Current Liabilities Provisions Total Current Liabilities Net Current Assets Miscellaneous Expenses not written off Deferred Tax Assets Deferred Tax Liability Net Deferred Tax Total Assets
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