General Dynamics Corp. (GD)

DuPont Analysis: Decomposition of ROE

Difficulty: Beginner

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

General Dynamics Corp., decomposition of ROE

	ROE	=	ROA	×	Leverage

Dec 31, 2018	28.51%	=	7.37%	×	3.87
Dec 31, 2017	25.47%	=	8.31%	×	3.06
Dec 31, 2016	26.92%	=	8.99%	×	2.99
Dec 31, 2015	27.61%	=	9.27%	×	2.98
Dec 31, 2014	21.41%	=	7.16%	×	2.99

The primary reason for the increase in Return on Equity (ROE) over 2018 year is the increase in Financial Leverage.

General Dynamics Corp., decomposition of ROE

	ROE	=	Net Profit Margin	×	Asset Turnover	×	Leverage

Dec 31, 2018	28.51%	=	9.24%	×	0.80	×	3.87
Dec 31, 2017	25.47%	=	9.40%	×	0.88	×	3.06
Dec 31, 2016	26.92%	=	9.42%	×	0.95	×	2.99
Dec 31, 2015	27.61%	=	9.42%	×	0.98	×	2.98
Dec 31, 2014	21.41%	=	8.21%	×	0.87	×	2.99

The primary reason for the increase in Return on Equity (ROE) over 2018 year is the increase in Financial Leverage.

General Dynamics Corp., decomposition of ROE

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

Dec 31, 2018	28.51%	=	0.82	×	0.92	×	12.28%	×	0.80	×	3.87
Dec 31, 2017	25.47%	=	0.71	×	0.97	×	13.54%	×	0.88	×	3.06
Dec 31, 2016	26.92%	=	0.72	×	0.98	×	13.47%	×	0.95	×	2.99
Dec 31, 2015	27.61%	=	0.72	×	0.98	×	13.35%	×	0.98	×	2.98
Dec 31, 2014	21.41%	=	0.69	×	0.97	×	12.20%	×	0.87	×	2.99

The primary reason for the increase in Return on Equity (ROE) over 2018 year is the increase in Financial Leverage.

General Dynamics Corp., decomposition of ROA

	ROA	=	Net Profit Margin	×	Asset Turnover

Dec 31, 2018	7.37%	=	9.24%	×	0.80
Dec 31, 2017	8.31%	=	9.40%	×	0.88
Dec 31, 2016	8.99%	=	9.42%	×	0.95
Dec 31, 2015	9.27%	=	9.42%	×	0.98
Dec 31, 2014	7.16%	=	8.21%	×	0.87

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

General Dynamics Corp., decomposition of ROA

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

Dec 31, 2018	7.37%	=	0.82	×	0.92	×	12.28%	×	0.80
Dec 31, 2017	8.31%	=	0.71	×	0.97	×	13.54%	×	0.88
Dec 31, 2016	8.99%	=	0.72	×	0.98	×	13.47%	×	0.95
Dec 31, 2015	9.27%	=	0.72	×	0.98	×	13.35%	×	0.98
Dec 31, 2014	7.16%	=	0.69	×	0.97	×	12.20%	×	0.87

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

General Dynamics Corp., decomposition of Net Profit Margin

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

Dec 31, 2018	9.24%	=	0.82	×	0.92	×	12.28%
Dec 31, 2017	9.40%	=	0.71	×	0.97	×	13.54%
Dec 31, 2016	9.42%	=	0.72	×	0.98	×	13.47%
Dec 31, 2015	9.42%	=	0.72	×	0.98	×	13.35%
Dec 31, 2014	8.21%	=	0.69	×	0.97	×	12.20%

The primary reason for the decrease in Net Profit Margin over 2018 year is the decrease in operating profitability measured by EBIT Margin.