E.I. DuPont de Nemours & Co. (DD) | DuPont Analysis: Decomposition of ROE

Decomposing ROE involves expressing net income divided by shareholders' equity as the product of component ratios.

• Two-Component Disaggregation of ROE
• Three-Component Disaggregation of ROE
• Five-Component Disaggregation of ROE
• Two-Way Decomposition of ROA
• Four-Way Decomposition of ROA
• Decomposition of Net Profit Margin

Two-Component Disaggregation of ROE

E.I. DuPont de Nemours & Co., decomposition of ROE

	ROE	=	ROA	×	Leverage
Dec 31, 2011	40.43%		7.16%		5.64
Dec 31, 2010	32.67%		7.50%		4.36
Dec 31, 2009	24.32%		4.60%		5.29
Dec 31, 2008	28.17%		5.54%		5.08
Dec 31, 2007	26.83%		8.75%		3.06

Source: Based on data from E.I. DuPont de Nemours & Co. Annual Reports

 

The primary reason for the increase in Return on Equity (ROE) over 2011 year is the increase in Financial Leverage.

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Three-Component Disaggregation of ROE

E.I. DuPont de Nemours & Co., decomposition of ROE

	ROE	=	Net Profit Margin	×	Asset Turnover	×	Leverage
Dec 31, 2011	40.43%		9.15%		0.78		5.64
Dec 31, 2010	32.67%		9.62%		0.78		4.36
Dec 31, 2009	24.32%		6.72%		0.68		5.29
Dec 31, 2008	28.17%		6.57%		0.84		5.08
Dec 31, 2007	26.83%		10.17%		0.86		3.06

Source: Based on data from E.I. DuPont de Nemours & Co. Annual Reports

 

The primary reason for the increase in Return on Equity (ROE) over 2011 year is the increase in Financial Leverage.

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Five-Component Disaggregation of ROE

E.I. DuPont de Nemours & Co., decomposition of ROE

	ROE	=	Tax Burden	×	Interest Burden	×	EBIT Margin	×	Asset Turnover	×	Leverage
Dec 31, 2011	40.43%		0.82		0.90		12.36%		0.78		5.64
Dec 31, 2010	32.67%		0.82		0.86		13.59%		0.78		4.36
Dec 31, 2009	24.32%		0.81		0.84		9.87%		0.68		5.29
Dec 31, 2008	28.17%		0.84		0.86		9.05%		0.84		5.08
Dec 31, 2007	26.83%		0.80		0.90		14.18%		0.86		3.06

Source: Based on data from E.I. DuPont de Nemours & Co. Annual Reports

 

The primary reason for the increase in Return on Equity (ROE) over 2011 year is the increase in Financial Leverage.

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Two-Way Decomposition of ROA

E.I. DuPont de Nemours & Co., decomposition of ROA

	ROA	=	Net Profit Margin	×	Asset Turnover
Dec 31, 2011	7.16%		9.15%		0.78
Dec 31, 2010	7.50%		9.62%		0.78
Dec 31, 2009	4.60%		6.72%		0.68
Dec 31, 2008	5.54%		6.57%		0.84
Dec 31, 2007	8.75%		10.17%		0.86

Source: Based on data from E.I. DuPont de Nemours & Co. Annual Reports

 

The primary reason for the decrease in Return on Assets (ROA) over 2011 year is the decrease in profitability measured by Net Profit Margin.

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Four-Way Decomposition of ROA

E.I. DuPont de Nemours & Co., decomposition of ROA

	ROA	=	Tax Burden	×	Interest Burden	×	EBIT Margin	×	Asset Turnover
Dec 31, 2011	7.16%		0.82		0.90		12.36%		0.78
Dec 31, 2010	7.50%		0.82		0.86		13.59%		0.78
Dec 31, 2009	4.60%		0.81		0.84		9.87%		0.68
Dec 31, 2008	5.54%		0.84		0.86		9.05%		0.84
Dec 31, 2007	8.75%		0.80		0.90		14.18%		0.86

Source: Based on data from E.I. DuPont de Nemours & Co. Annual Reports

 

The primary reason for the decrease in Return on Assets (ROA) over 2011 year is the decrease in operating profitability measured by EBIT Margin.

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Decomposition of Net Profit Margin

E.I. DuPont de Nemours & Co., decomposition of Net Profit Margin

	Net Profit Margin	=	Tax Burden	×	Interest Burden	×	EBIT Margin
Dec 31, 2011	9.15%		0.82		0.90		12.36%
Dec 31, 2010	9.62%		0.82		0.86		13.59%
Dec 31, 2009	6.72%		0.81		0.84		9.87%
Dec 31, 2008	6.57%		0.84		0.86		9.05%
Dec 31, 2007	10.17%		0.80		0.90		14.18%

Source: Based on data from E.I. DuPont de Nemours & Co. Annual Reports

 

The primary reason for the decrease in Net Profit Margin over 2011 year is the decrease in operating profitability measured by EBIT Margin.

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May 23, 2012

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