Understanding and Interpreting

Ratio Analysis using Du Pont

Analysis

Return on equity

Profit After Tax

%
Avg. Shareholdersequity

Is effected by three major factors:

1. Profitability margin:

Profit After Tax

%
Sales & Other income

X
2. Efficiency of Asset Use
X
3. Financial Leverage

Sales & Other income

Avg. Total Assets

(times)

Avg. Total Assets

(times)
Avg. Shareholders equity

4. Profitability Margin (1) X Efficiency of Asset use (2)

= Return on Assets
5. Profitability Margin (1) X Efficiency of Asset Use (2) X Financial
leverage (3) = RETURN ON EQUITY

DuPont Analysis- Asian Paints Ltd

Sales & other income
8,105
Cost of Sales

Earnings Available

5,116

960

Income Statement

Other Operating Expense

Net Profit Margin

divided by

1,526

11.8%

Interest Expense

Sales & other income

99

8,105

Tax Expense
404
Others

Return on Total Assets (ROA)

multiplied by
-

21.7%

Sales & Other income

8,105
Avg.Current Assets
2,615

Total Asset Turnover

divided by

1.83

+
Net Fixed Assets + Other
Non Current Assets

Return on Avg. Equity (ROE)

Total Avg. Assets

multiplied by

Balance Sheet

1,802

Avg. Outside
Liabilities(excl.Long term
debt)

4,417

43.02%

Total Avg. outside

Liabilities

2,130

2,186

Total Avg. outside Liab + Avg.

Shareholders equity = Total
Assets

Long Term Debt

+
56

4,417

Avg. Shareholders' funds/

Equity (SE)

Financial Leverage multiplier

divided by

2,232

2.00

Avg. Shareholders funds

2,232