DuPont Analysis: Decomposition of ROE

Difficulty: Beginner


Two-Component Disaggregation of ROE

Honeywell International Inc., decomposition of ROE

Microsoft Excel LibreOffice Calc
ROE = ROA × Leverage
Dec 31, 2018 37.21% 11.71% 3.18
Dec 31, 2017 9.58% 2.79% 3.44
Dec 31, 2016 24.83% 8.88% 2.80
Dec 31, 2015 26.08% 9.67% 2.70
Dec 31, 2014 24.01% 9.33% 2.57

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

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

Honeywell International Inc., decomposition of ROE

Microsoft Excel LibreOffice Calc
ROE = Net Profit Margin × Asset Turnover × Leverage
Dec 31, 2018 37.21% 16.18% 0.72 3.18
Dec 31, 2017 9.58% 4.08% 0.68 3.44
Dec 31, 2016 24.83% 12.24% 0.73 2.80
Dec 31, 2015 26.08% 12.36% 0.78 2.70
Dec 31, 2014 24.01% 10.52% 0.89 2.57

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

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


Five-Component Disaggregation of ROE

Honeywell International Inc., decomposition of ROE

Microsoft Excel LibreOffice Calc
ROE = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover × Leverage
Dec 31, 2018 37.21% 0.91 0.95 18.64% 0.72 3.18
Dec 31, 2017 9.58% 0.24 0.96 17.70% 0.68 3.44
Dec 31, 2016 24.83% 0.75 0.95 17.17% 0.73 2.80
Dec 31, 2015 26.08% 0.73 0.95 17.67% 0.78 2.70
Dec 31, 2014 24.01% 0.74 0.95 15.00% 0.89 2.57

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

The primary reason for the increase in Return on Equity (ROE) over 2018 year is the increase in effect of taxes measured by Tax Burden.


Two-Way Decomposition of ROA

Honeywell International Inc., decomposition of ROA

Microsoft Excel LibreOffice Calc
ROA = Net Profit Margin × Asset Turnover
Dec 31, 2018 11.71% 16.18% 0.72
Dec 31, 2017 2.79% 4.08% 0.68
Dec 31, 2016 8.88% 12.24% 0.73
Dec 31, 2015 9.67% 12.36% 0.78
Dec 31, 2014 9.33% 10.52% 0.89

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

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


Four-Way Decomposition of ROA

Honeywell International Inc., decomposition of ROA

Microsoft Excel LibreOffice Calc
ROA = Tax Burden × Interest Burden × EBIT Margin × Asset Turnover
Dec 31, 2018 11.71% 0.91 0.95 18.64% 0.72
Dec 31, 2017 2.79% 0.24 0.96 17.70% 0.68
Dec 31, 2016 8.88% 0.75 0.95 17.17% 0.73
Dec 31, 2015 9.67% 0.73 0.95 17.67% 0.78
Dec 31, 2014 9.33% 0.74 0.95 15.00% 0.89

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

The primary reason for the increase in Return on Assets (ROA) over 2018 year is the increase in effect of taxes measured by Tax Burden.


Decomposition of Net Profit Margin

Honeywell International Inc., decomposition of Net Profit Margin

Microsoft Excel LibreOffice Calc
Net Profit Margin = Tax Burden × Interest Burden × EBIT Margin
Dec 31, 2018 16.18% 0.91 0.95 18.64%
Dec 31, 2017 4.08% 0.24 0.96 17.70%
Dec 31, 2016 12.24% 0.75 0.95 17.17%
Dec 31, 2015 12.36% 0.73 0.95 17.67%
Dec 31, 2014 10.52% 0.74 0.95 15.00%

Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

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