Factor analysis of return on equity of an enterprise using the Dupont method

The possibility to perform equity profitability analysis of an enterprise using the DuPont method with identification of factors affecting the resulting indicator is shown in the article; besides, the historical development of the model (transfer from two-factor model to five-factor model) is presented here. Then, the impact of numerous factors (such as capital leverage, profit margin, total assets turnover) on return on equity is graphically represented. Besides, through the example of the most common three-factor Dupon model, the way to calculate such indicators as return on equity, return on assets is demonstrated, as well the conclusion on comparison of these two indicators is given. Finally, the advantages and disadvantages of using this model are provided.