DuPont Formula

Description
Using the DuPont Formula

Before investing in any company, an investor must be thorough with the financial ratios.

The Du Pont formula aims to prevent them wasting valuable time and effort. At the same time, they can better understand how leveraged the company is and how efficiently it is using up its resources. Return on Equity sheds some light on the proportion between shareholders' equity and net income. However, it doesn't allow us to comprehend the amount of profitability a firm has or how the firm has been using its assets.

With the DuPont formula, all can be calculated. All you have to do is take a look at the shareholders' equity statement, the balance sheet, and the income statement.