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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
General Electric Co., decomposition of ROE
| ROE | = | ROA | × | Leverage | |
|---|---|---|---|---|---|
| Dec 31, 2017 | % |
% |
|
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| Dec 31, 2016 | % |
% |
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| Dec 31, 2015 | % |
% |
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| Dec 31, 2014 | % |
% |
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| Dec 31, 2013 | % |
% |
|
Source: Based on data from General Electric Co. Annual Reports
The primary reason for the decrease in Return on Equity (ROE) over 2017 year is the decrease in profitability measured by Return on Assets (ROA).
Three-Component Disaggregation of ROE
General Electric Co., decomposition of ROE
| ROE | = | Net Profit Margin | × | Asset Turnover | × | Leverage | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2017 | % |
% |
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| Dec 31, 2016 | % |
% |
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| Dec 31, 2015 | % |
% |
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| Dec 31, 2014 | % |
% |
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|||
| Dec 31, 2013 | % |
% |
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|
Source: Based on data from General Electric Co. Annual Reports
The primary reason for the decrease in Return on Equity (ROE) over 2017 year is the decrease in profitability measured by Net Profit Margin.
Five-Component Disaggregation of ROE
General Electric Co., decomposition of ROE
| ROE | = | Tax Burden | × | Interest Burden | × | EBIT Margin | × | Asset Turnover | × | Leverage | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2017 | % |
|
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% |
|
|
|||||
| Dec 31, 2016 | % |
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|
% |
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| Dec 31, 2015 | % |
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% |
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| Dec 31, 2014 | % |
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|
% |
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|
|||||
| Dec 31, 2013 | % |
|
|
% |
|
|
Source: Based on data from General Electric Co. Annual Reports
The primary reason for the decrease in Return on Equity (ROE) over 2017 year is the decrease in operating profitability measured by EBIT Margin.
Two-Way Decomposition of ROA
General Electric Co., decomposition of ROA
| ROA | = | Net Profit Margin | × | Asset Turnover | |
|---|---|---|---|---|---|
| Dec 31, 2017 | % |
% |
|
||
| Dec 31, 2016 | % |
% |
|
||
| Dec 31, 2015 | % |
% |
|
||
| Dec 31, 2014 | % |
% |
|
||
| Dec 31, 2013 | % |
% |
|
Source: Based on data from General Electric Co. Annual Reports
The primary reason for the decrease in Return on Assets (ROA) over 2017 year is the decrease in profitability measured by Net Profit Margin.
Four-Way Decomposition of ROA
General Electric Co., decomposition of ROA
| ROA | = | Tax Burden | × | Interest Burden | × | EBIT Margin | × | Asset Turnover | |
|---|---|---|---|---|---|---|---|---|---|
| Dec 31, 2017 | % |
|
|
% |
|
||||
| Dec 31, 2016 | % |
|
|
% |
|
||||
| Dec 31, 2015 | % |
|
|
% |
|
||||
| Dec 31, 2014 | % |
|
|
% |
|
||||
| Dec 31, 2013 | % |
|
|
% |
|
Source: Based on data from General Electric Co. Annual Reports
The primary reason for the decrease in Return on Assets (ROA) over 2017 year is the decrease in operating profitability measured by EBIT Margin.
Decomposition of Net Profit Margin
General Electric Co., decomposition of Net Profit Margin
| Net Profit Margin | = | Tax Burden | × | Interest Burden | × | EBIT Margin | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2017 | % |
|
|
% |
|||
| Dec 31, 2016 | % |
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|
% |
|||
| Dec 31, 2015 | % |
|
|
% |
|||
| Dec 31, 2014 | % |
|
|
% |
|||
| Dec 31, 2013 | % |
|
|
% |
Source: Based on data from General Electric Co. Annual Reports
The primary reason for the decrease in Net Profit Margin over 2017 year is the decrease in operating profitability measured by EBIT Margin.
