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DuPont Analysis: Decomposition of ROE
Difficulty: Beginner
Decomposing ROE involves expressing net income divided by shareholders' equity as the product of component ratios.
Two-Component Disaggregation of ROE
Costco Wholesale Corp., decomposition of ROE
| ROE | = | ROA | × | Leverage | |
|---|---|---|---|---|---|
| Sep 3, 2017 | % |
% |
|
||
| Aug 28, 2016 | % |
% |
|
||
| Aug 30, 2015 | % |
% |
|
||
| Aug 31, 2014 | % |
% |
|
||
| Sep 1, 2013 | % |
% |
|
||
| Sep 2, 2012 | % |
% |
|
Source: Based on data from Costco Wholesale Corp. Annual Reports
The primary reason for the increase in Return on Equity (ROE) over 2017 year is the increase in Financial Leverage.
Three-Component Disaggregation of ROE
Costco Wholesale Corp., decomposition of ROE
| ROE | = | Net Profit Margin | × | Asset Turnover | × | Leverage | |
|---|---|---|---|---|---|---|---|
| Sep 3, 2017 | % |
% |
|
|
|||
| Aug 28, 2016 | % |
% |
|
|
|||
| Aug 30, 2015 | % |
% |
|
|
|||
| Aug 31, 2014 | % |
% |
|
|
|||
| Sep 1, 2013 | % |
% |
|
|
|||
| Sep 2, 2012 | % |
% |
|
|
Source: Based on data from Costco Wholesale Corp. Annual Reports
The primary reason for the increase in Return on Equity (ROE) over 2017 year is the increase in Financial Leverage.
Five-Component Disaggregation of ROE
Costco Wholesale Corp., decomposition of ROE
| ROE | = | Tax Burden | × | Interest Burden | × | EBIT Margin | × | Asset Turnover | × | Leverage | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Sep 3, 2017 | % |
|
|
% |
|
|
|||||
| Aug 28, 2016 | % |
|
|
% |
|
|
|||||
| Aug 30, 2015 | % |
|
|
% |
|
|
|||||
| Aug 31, 2014 | % |
|
|
% |
|
|
|||||
| Sep 1, 2013 | % |
|
|
% |
|
|
|||||
| Sep 2, 2012 | % |
|
|
% |
|
|
Source: Based on data from Costco Wholesale Corp. Annual Reports
The primary reason for the increase in Return on Equity (ROE) over 2017 year is the increase in Financial Leverage.
Two-Way Decomposition of ROA
Costco Wholesale Corp., decomposition of ROA
| ROA | = | Net Profit Margin | × | Asset Turnover | |
|---|---|---|---|---|---|
| Sep 3, 2017 | % |
% |
|
||
| Aug 28, 2016 | % |
% |
|
||
| Aug 30, 2015 | % |
% |
|
||
| Aug 31, 2014 | % |
% |
|
||
| Sep 1, 2013 | % |
% |
|
||
| Sep 2, 2012 | % |
% |
|
Source: Based on data from Costco Wholesale Corp. Annual Reports
The primary reason for the increase in Return on Assets (ROA) over 2017 year is the increase in profitability measured by Net Profit Margin.
Four-Way Decomposition of ROA
Costco Wholesale Corp., decomposition of ROA
| ROA | = | Tax Burden | × | Interest Burden | × | EBIT Margin | × | Asset Turnover | |
|---|---|---|---|---|---|---|---|---|---|
| Sep 3, 2017 | % |
|
|
% |
|
||||
| Aug 28, 2016 | % |
|
|
% |
|
||||
| Aug 30, 2015 | % |
|
|
% |
|
||||
| Aug 31, 2014 | % |
|
|
% |
|
||||
| Sep 1, 2013 | % |
|
|
% |
|
||||
| Sep 2, 2012 | % |
|
|
% |
|
Source: Based on data from Costco Wholesale Corp. Annual Reports
The primary reason for the increase in Return on Assets (ROA) over 2017 year is the increase in effect of taxes measured by Tax Burden.
Decomposition of Net Profit Margin
Costco Wholesale Corp., decomposition of Net Profit Margin
| Net Profit Margin | = | Tax Burden | × | Interest Burden | × | EBIT Margin | |
|---|---|---|---|---|---|---|---|
| Sep 3, 2017 | % |
|
|
% |
|||
| Aug 28, 2016 | % |
|
|
% |
|||
| Aug 30, 2015 | % |
|
|
% |
|||
| Aug 31, 2014 | % |
|
|
% |
|||
| Sep 1, 2013 | % |
|
|
% |
|||
| Sep 2, 2012 | % |
|
|
% |
Source: Based on data from Costco Wholesale Corp. Annual Reports
The primary reason for the increase in Net Profit Margin over 2017 year is the increase in effect of taxes measured by Tax Burden.
