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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.

Two-Component Disaggregation of ROE

Facebook Inc., decomposition of ROE

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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

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

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).

Three-Component Disaggregation of ROE

Facebook Inc., decomposition of ROE

Microsoft Excel LibreOffice Calc
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

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

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

Five-Component Disaggregation of ROE

Facebook Inc., decomposition of ROE

Microsoft Excel LibreOffice Calc
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

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

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

Two-Way Decomposition of ROA

Facebook Inc., decomposition of ROA

Microsoft Excel LibreOffice Calc
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

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

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

Four-Way Decomposition of ROA

Facebook Inc., decomposition of ROA

Microsoft Excel LibreOffice Calc
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

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

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

Decomposition of Net Profit Margin

Facebook Inc., decomposition of Net Profit Margin

Microsoft Excel LibreOffice Calc
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%

Based on: 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29).

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