Decomposing

Performance Measures

Dupont Analysis
 Decomposes performance into core drivers
 Two-way decomposition of ROA/ROI
 Return on Sales
 Profit Margin
 Asset Turnover
 Three-way decomposition of ROE
 Return on Sales
 Profit Margin
 Asset Turnover
 Leverage

1
 Return on Assets (ROA)

Income
ROA =
Assets

Income Sales
ROA = ×
Sales Assets

Return on Asset
Sales turnover

Return on Equity (ROE)

Income
ROE =
Equity

Income Sales Assets

ROE = × ×
Sales Assets Equity

Return on Asset Financial

Sales turnover leverage

2
Cash-to-Cash cycle
Inventory
Days Inventory =
(COGS)/365

A/R
Days receivables =
(Sales)/365

A/P
Days payable =
(COGS)/365

Cash-to-Cash cycle = Inv + Rec – Pay

Example 1….

3
Example 2….

Questions