Du pont analysis with respect to airline industry

Name
y Arab fahed y Dhole Aabid y Momin shamoil y Faiz sayed y Faim ahmed y Nazeef arzoo

roll no
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OVERVEIW KINGFISHER AIRLINES

y Kingfisher airlines is an airline group based in India. y Kingfisher Airlines is one of the only seven airlines

awarded 5 stars rating by Skytrax. y Kingfisher operates more than 375 daily flights to 71 destination y In may 2009, kingfisher airlines carried more than 1 million passengers giving it the highest market share among all the airlines.

OVERVEIW of JETAIRWAYS
y Jet airways is one of the major Indian airline based

in Mumbai , Maharashtra.
y It is the largest airline and the market leader in the

domestic sector.
y It operates over 400 flights a daily to 67 destinations

worldwide.
y Jet airways is owned by naresh goyal.

DuPont analysis
A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are measured at their gross book value rather than at net book value in order to produce a higher return on equity (ROE). It is also known as "DuPont identity". 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

Basic Formula for ROE

Net profit Sales
Profit margin

Sales Assets
Asset Turnover

Assets Equity
Equity multiplie r

Net profit Equity

ROE

Operating efficiency

Asset use efficiency

Financial leverage

y The Return On Investment (ROI) Ratio: It

measures the combined effects of profit margins and asset turnover. ROI= Net Income/Sales x Sales/Total Assets = Net Income/ Total Assets
y The Return On Equity (ROE) Ratio is a measure of

the rate of return to stockholders. ROE= Net Profit/ Pretax Profit x Pretax Profit/ EBIT = Net Profit/ Equity

ROI

ROI = Net Income Total Assets

COMPANY Net Income Total assests ROI (In crores) kingfisher -1744.49 4024.17 -0.4335 (In crores) Jet airways -467.64 2890.65 -0.1617

ROE

ROE= Net Profit After Tax Equity

COMPANY Net Profit After tax Equity ROE (In crores) -1744.39 -3898.45 0.4474 (In ) -467.64 2641.98 -0.177

Elements Of ROE

Measured

Formula
NP SALES SALES ASSET ASSET EQUITY

kingfishe r -0.3441

Jet airways -0.1306

OPERATING PROFIT EFFICIENC MARGIN Y ASSET USE EFFICIENC Y FINANCIAL LEVERAGE ASSET TURNOVER EQUITY MULTIPLIE R

1.2593

1.2379

-1.0322

-1.0941

y Financial leverage- If we have to check real effect of

For Mine reference

leverage on ROE, we have to study financial leverage. Financial leverage refers to the use of debt to acquire additional assets. Financial leverage may decrease or increase return on equity in different conditions. Financial over-leveraging means incurring a huge debt by borrowing funds at a lower rate of interest and utilizing the excess funds in high risk investments in order to maximize returns.
y Asset turnover - is a financial ratio that measures the

efficiency of a company's use of its assets in generating sales revenue or sales income to the company