DuPont Analysis: Decomposition of ROE


Two-Component Disaggregation of ROE

Caterpillar Inc., decomposition of ROE

 
ROE = ROA × Leverage
Dec 31, 2013 18.21% 4.46% 4.08
Dec 31, 2012 32.40% 6.36% 5.10
Dec 31, 2011 38.25% 6.05% 6.32
Dec 31, 2010 24.94% 4.22% 5.91
Dec 31, 2009 10.24% 1.49% 6.87

Source: Based on data from Caterpillar Inc. Annual Reports

 

The primary reason for the decrease in Return on Equity (ROE) over 2013 year is the decrease in profitability measured by Return on Assets (ROA).

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Three-Component Disaggregation of ROE

Caterpillar Inc., decomposition of ROE

 
ROE = Net Profit Margin × Asset Turnover × Leverage
Dec 31, 2013 18.21% 7.19% 0.62 4.08
Dec 31, 2012 32.40% 9.01% 0.71 5.10
Dec 31, 2011 38.25% 8.59% 0.70 6.32
Dec 31, 2010 24.94% 6.77% 0.62 5.91
Dec 31, 2009 10.24% 3.03% 0.49 6.87

Source: Based on data from Caterpillar Inc. Annual Reports

 

The primary reason for the decrease in Return on Equity (ROE) over 2013 year is the decrease in profitability measured by Net Profit Margin.

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Five-Component Disaggregation of ROE

Caterpillar Inc., decomposition of ROE

 
ROE = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover × Leverage
Dec 31, 2013 18.21% 0.74 0.92 10.58% 0.62 4.08
Dec 31, 2012 32.40% 0.69 0.95 13.76% 0.71 5.10
Dec 31, 2011 38.25% 0.74 0.94 12.27% 0.70 6.32
Dec 31, 2010 24.94% 0.74 0.91 10.06% 0.62 5.91
Dec 31, 2009 10.24% 1.43 0.62 3.43% 0.49 6.87

Source: Based on data from Caterpillar Inc. Annual Reports

 

The primary reason for the decrease in Return on Equity (ROE) over 2013 year is the decrease in operating profitability measured by EBIT Margin.

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Two-Way Decomposition of ROA

Caterpillar Inc., decomposition of ROA

 
ROA = Net Profit Margin × Asset Turnover
Dec 31, 2013 4.46% 7.19% 0.62
Dec 31, 2012 6.36% 9.01% 0.71
Dec 31, 2011 6.05% 8.59% 0.70
Dec 31, 2010 4.22% 6.77% 0.62
Dec 31, 2009 1.49% 3.03% 0.49

Source: Based on data from Caterpillar Inc. Annual Reports

 

The primary reason for the decrease in Return on Assets (ROA) over 2013 year is the decrease in profitability measured by Net Profit Margin.

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Four-Way Decomposition of ROA

Caterpillar Inc., decomposition of ROA

 
ROA = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover
Dec 31, 2013 4.46% 0.74 0.92 10.58% 0.62
Dec 31, 2012 6.36% 0.69 0.95 13.76% 0.71
Dec 31, 2011 6.05% 0.74 0.94 12.27% 0.70
Dec 31, 2010 4.22% 0.74 0.91 10.06% 0.62
Dec 31, 2009 1.49% 1.43 0.62 3.43% 0.49

Source: Based on data from Caterpillar Inc. Annual Reports

 

The primary reason for the decrease in Return on Assets (ROA) over 2013 year is the decrease in operating profitability measured by EBIT Margin.

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Decomposition of Net Profit Margin

Caterpillar Inc., decomposition of Net Profit Margin

 
Net Profit Margin = Tax Burden × Interest Burden × EBIT Margin
Dec 31, 2013 7.19% 0.74 0.92 10.58%
Dec 31, 2012 9.01% 0.69 0.95 13.76%
Dec 31, 2011 8.59% 0.74 0.94 12.27%
Dec 31, 2010 6.77% 0.74 0.91 10.06%
Dec 31, 2009 3.03% 1.43 0.62 3.43%

Source: Based on data from Caterpillar Inc. Annual Reports

 

The primary reason for the decrease in Net Profit Margin over 2013 year is the decrease in operating profitability measured by EBIT Margin.

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