Procter & Gamble Co. (PG) | 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

Procter & Gamble Co., decomposition of ROE

	ROE	=	ROA	×	Leverage
Jun 30, 2011	17.44%		8.53%		2.05
Jun 30, 2010	20.84%		9.94%		2.10
Jun 30, 2009	21.29%		9.96%		2.14
Jun 30, 2008	17.38%		8.39%		2.07
Jun 30, 2007	15.49%		7.49%		2.07
Jun 30, 2006	13.80%		6.40%		2.16

Source: Based on data from Procter & Gamble Co. Annual Reports

 

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

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Three-Component Disaggregation of ROE

Procter & Gamble Co., decomposition of ROE

	ROE	=	Net Profit Margin	×	Asset Turnover	×	Leverage
Jun 30, 2011	17.44%		14.29%		0.60		2.05
Jun 30, 2010	20.84%		16.13%		0.62		2.10
Jun 30, 2009	21.29%		17.00%		0.59		2.14
Jun 30, 2008	17.38%		14.46%		0.58		2.07
Jun 30, 2007	15.49%		13.52%		0.55		2.07
Jun 30, 2006	13.80%		12.73%		0.50		2.16

Source: Based on data from Procter & Gamble Co. Annual Reports

 

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

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Five-Component Disaggregation of ROE

Procter & Gamble Co., decomposition of ROE

	ROE	=	Tax Burden	×	Interest Burden	×	EBIT Margin	×	Asset Turnover	×	Leverage
Jun 30, 2011	17.44%		0.78		0.95		19.40%		0.60		2.05
Jun 30, 2010	20.84%		0.76		0.95		22.53%		0.62		2.10
Jun 30, 2009	21.29%		0.77		0.93		23.82%		0.59		2.14
Jun 30, 2008	17.38%		0.75		0.92		21.01%		0.58		2.07
Jun 30, 2007	15.49%		0.70		0.92		20.94%		0.55		2.07
Jun 30, 2006	13.80%		0.70		0.92		19.84%		0.50		2.16

Source: Based on data from Procter & Gamble Co. Annual Reports

 

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

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Two-Way Decomposition of ROA

Procter & Gamble Co., decomposition of ROA

	ROA	=	Net Profit Margin	×	Asset Turnover
Jun 30, 2011	8.53%		14.29%		0.60
Jun 30, 2010	9.94%		16.13%		0.62
Jun 30, 2009	9.96%		17.00%		0.59
Jun 30, 2008	8.39%		14.46%		0.58
Jun 30, 2007	7.49%		13.52%		0.55
Jun 30, 2006	6.40%		12.73%		0.50

Source: Based on data from Procter & Gamble 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

Procter & Gamble Co., decomposition of ROA

	ROA	=	Tax Burden	×	Interest Burden	×	EBIT Margin	×	Asset Turnover
Jun 30, 2011	8.53%		0.78		0.95		19.40%		0.60
Jun 30, 2010	9.94%		0.76		0.95		22.53%		0.62
Jun 30, 2009	9.96%		0.77		0.93		23.82%		0.59
Jun 30, 2008	8.39%		0.75		0.92		21.01%		0.58
Jun 30, 2007	7.49%		0.70		0.92		20.94%		0.55
Jun 30, 2006	6.40%		0.70		0.92		19.84%		0.50

Source: Based on data from Procter & Gamble 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

Procter & Gamble Co., decomposition of Net Profit Margin

	Net Profit Margin	=	Tax Burden	×	Interest Burden	×	EBIT Margin
Jun 30, 2011	14.29%		0.78		0.95		19.40%
Jun 30, 2010	16.13%		0.76		0.95		22.53%
Jun 30, 2009	17.00%		0.77		0.93		23.82%
Jun 30, 2008	14.46%		0.75		0.92		21.01%
Jun 30, 2007	13.52%		0.70		0.92		20.94%
Jun 30, 2006	12.73%		0.70		0.92		19.84%

Source: Based on data from Procter & Gamble 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 24, 2012

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