Facebook Inc. (FB)

DuPont Analysis: Decomposition of ROE

Difficulty: Beginner

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

Facebook Inc., decomposition of ROE

	ROE	=	ROA	×	Leverage

Dec 31, 2018	26.28%	=	22.72%	×	1.16
Dec 31, 2017	21.43%	=	18.85%	×	1.14
Dec 31, 2016	17.26%	=	15.73%	×	1.10
Dec 31, 2015	8.34%	=	7.46%	×	1.12
Dec 31, 2014	8.14%	=	7.32%	×	1.11

The primary reason for the increase in Return on Equity (ROE) over 2018 year is the increase in profitability measured by Return on Assets (ROA).

Facebook Inc., decomposition of ROE

	ROE	=	Net Profit Margin	×	Asset Turnover	×	Leverage

Dec 31, 2018	26.28%	=	39.60%	×	0.57	×	1.16
Dec 31, 2017	21.43%	=	39.20%	×	0.48	×	1.14
Dec 31, 2016	17.26%	=	36.97%	×	0.43	×	1.10
Dec 31, 2015	8.34%	=	20.57%	×	0.36	×	1.12
Dec 31, 2014	8.14%	=	23.58%	×	0.31	×	1.11

The primary reason for the increase in Return on Equity (ROE) over 2018 year is the increase in efficiency measured by Asset Turnover.

Facebook Inc., decomposition of ROE

	ROE	=	Tax Burden	×	Interest Burden	×	EBIT Margin	×	Asset Turnover	×	Leverage

Dec 31, 2018	26.28%	=	0.87	×	1.00	×	45.44%	×	0.57	×	1.16
Dec 31, 2017	21.43%	=	0.77	×	1.00	×	50.67%	×	0.48	×	1.14
Dec 31, 2016	17.26%	=	0.82	×	1.00	×	45.33%	×	0.43	×	1.10
Dec 31, 2015	8.34%	=	0.60	×	1.00	×	34.68%	×	0.36	×	1.12
Dec 31, 2014	8.14%	=	0.60	×	1.00	×	39.57%	×	0.31	×	1.11

The primary reason for the increase in Return on Equity (ROE) over 2018 year is the increase in efficiency measured by Asset Turnover.

Facebook Inc., decomposition of ROA

	ROA	=	Net Profit Margin	×	Asset Turnover

Dec 31, 2018	22.72%	=	39.60%	×	0.57
Dec 31, 2017	18.85%	=	39.20%	×	0.48
Dec 31, 2016	15.73%	=	36.97%	×	0.43
Dec 31, 2015	7.46%	=	20.57%	×	0.36
Dec 31, 2014	7.32%	=	23.58%	×	0.31

The primary reason for the increase in Return on Assets (ROA) over 2018 year is the increase in Asset Turnover.

Facebook Inc., decomposition of ROA

	ROA	=	Tax Burden	×	Interest Burden	×	EBIT Margin	×	Asset Turnover

Dec 31, 2018	22.72%	=	0.87	×	1.00	×	45.44%	×	0.57
Dec 31, 2017	18.85%	=	0.77	×	1.00	×	50.67%	×	0.48
Dec 31, 2016	15.73%	=	0.82	×	1.00	×	45.33%	×	0.43
Dec 31, 2015	7.46%	=	0.60	×	1.00	×	34.68%	×	0.36
Dec 31, 2014	7.32%	=	0.60	×	1.00	×	39.57%	×	0.31

The primary reason for the increase in Return on Assets (ROA) over 2018 year is the increase in efficiency measured by Asset Turnover.

Facebook Inc., decomposition of Net Profit Margin

	Net Profit Margin	=	Tax Burden	×	Interest Burden	×	EBIT Margin

Dec 31, 2018	39.60%	=	0.87	×	1.00	×	45.44%
Dec 31, 2017	39.20%	=	0.77	×	1.00	×	50.67%
Dec 31, 2016	36.97%	=	0.82	×	1.00	×	45.33%
Dec 31, 2015	20.57%	=	0.60	×	1.00	×	34.68%
Dec 31, 2014	23.58%	=	0.60	×	1.00	×	39.57%

The primary reason for the increase in Net Profit Margin over 2018 year is the increase in effect of taxes measured by Tax Burden.