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

Illinois Tool Works Inc., decomposition of ROE (quarterly data)

	ROE	=	ROA	×	Leverage

Jun 30, 2019	79.75%	=	16.23%	×	4.91
Mar 31, 2019	78.47%	=	16.36%	×	4.80
Dec 31, 2018	78.76%	=	17.24%	×	4.57
Sep 30, 2018	53.08%	=	12.27%	×	4.32
Jun 30, 2018	49.72%	=	12.12%	×	4.10
Mar 31, 2018	43.35%	=	11.16%	×	3.89
Dec 31, 2017	36.79%	=	10.05%	×	3.66
Sep 30, 2017	45.19%	=	13.91%	×	3.25
Jun 30, 2017	45.38%	=	13.60%	×	3.34
Mar 31, 2017	46.81%	=	13.54%	×	3.46
Dec 31, 2016	47.84%	=	13.39%	×	3.57
Sep 30, 2016	41.31%	=	12.59%	×	3.28
Jun 30, 2016	39.51%	=	12.84%	×	3.08
Mar 31, 2016	36.58%	=	12.37%	×	2.96
Dec 31, 2015	36.35%	=	12.07%	×	3.01
Sep 30, 2015	37.34%	=	11.79%	×	3.17
Jun 30, 2015	36.19%	=	11.74%	×	3.08
Mar 31, 2015	58.88%	=	18.39%	×	3.20
Dec 31, 2014	43.20%	=	16.66%	×	2.59
Sep 30, 2014	—	=	—	×	2.44
Jun 30, 2014	—	=	—	×	2.36
Mar 31, 2014	—	=	—	×	2.35

The primary reason for the increase in Return on Equity (ROE) over Q2 2019 is the increase in Financial Leverage.

Illinois Tool Works Inc., decomposition of ROE (quarterly data)

	ROE	=	Net Profit Margin	×	Asset Turnover	×	Leverage

Jun 30, 2019	79.75%	=	17.17%	×	0.95	×	4.91
Mar 31, 2019	78.47%	=	17.21%	×	0.95	×	4.80
Dec 31, 2018	78.76%	=	17.36%	×	0.99	×	4.57
Sep 30, 2018	53.08%	=	12.69%	×	0.97	×	4.32
Jun 30, 2018	49.72%	=	12.70%	×	0.95	×	4.10
Mar 31, 2018	43.35%	=	12.36%	×	0.90	×	3.89
Dec 31, 2017	36.79%	=	11.79%	×	0.85	×	3.66
Sep 30, 2017	45.19%	=	16.12%	×	0.86	×	3.25
Jun 30, 2017	45.38%	=	15.50%	×	0.88	×	3.34
Mar 31, 2017	46.81%	=	15.24%	×	0.89	×	3.46
Dec 31, 2016	47.84%	=	14.96%	×	0.89	×	3.57
Sep 30, 2016	41.31%	=	14.68%	×	0.86	×	3.28
Jun 30, 2016	39.51%	=	14.65%	×	0.88	×	3.08
Mar 31, 2016	36.58%	=	14.31%	×	0.86	×	2.96
Dec 31, 2015	36.35%	=	14.17%	×	0.85	×	3.01
Sep 30, 2015	37.34%	=	13.93%	×	0.85	×	3.17
Jun 30, 2015	36.19%	=	13.73%	×	0.85	×	3.08
Mar 31, 2015	58.88%	=	20.56%	×	0.89	×	3.20
Dec 31, 2014	43.20%	=	20.34%	×	0.82	×	2.59
Sep 30, 2014	—	=	—	×	—	×	2.44
Jun 30, 2014	—	=	—	×	—	×	2.36
Mar 31, 2014	—	=	—	×	—	×	2.35

The primary reason for the increase in Return on Equity (ROE) over Q2 2019 is the increase in Financial Leverage.

Illinois Tool Works Inc., decomposition of ROE (quarterly data)

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

Jun 30, 2019	79.75%	=	0.75	×	0.93	×	24.46%	×	0.95	×	4.91
Mar 31, 2019	78.47%	=	0.75	×	0.93	×	24.62%	×	0.95	×	4.80
Dec 31, 2018	78.76%	=	0.76	×	0.93	×	24.72%	×	0.99	×	4.57
Sep 30, 2018	53.08%	=	0.56	×	0.93	×	24.53%	×	0.97	×	4.32
Jun 30, 2018	49.72%	=	0.55	×	0.93	×	25.01%	×	0.95	×	4.10
Mar 31, 2018	43.35%	=	0.54	×	0.93	×	24.90%	×	0.90	×	3.89
Dec 31, 2017	36.79%	=	0.52	×	0.93	×	24.66%	×	0.85	×	3.66
Sep 30, 2017	45.19%	=	0.71	×	0.93	×	24.55%	×	0.86	×	3.25
Jun 30, 2017	45.38%	=	0.71	×	0.92	×	23.68%	×	0.88	×	3.34
Mar 31, 2017	46.81%	=	0.70	×	0.92	×	23.43%	×	0.89	×	3.46
Dec 31, 2016	47.84%	=	0.70	×	0.92	×	23.13%	×	0.89	×	3.57
Sep 30, 2016	41.31%	=	0.70	×	0.92	×	22.62%	×	0.86	×	3.28
Jun 30, 2016	39.51%	=	0.70	×	0.92	×	22.58%	×	0.88	×	3.08
Mar 31, 2016	36.58%	=	0.70	×	0.92	×	22.14%	×	0.86	×	2.96
Dec 31, 2015	36.35%	=	0.70	×	0.92	×	21.97%	×	0.85	×	3.01
Sep 30, 2015	37.34%	=	0.70	×	0.92	×	21.66%	×	0.85	×	3.17
Jun 30, 2015	36.19%	=	0.70	×	0.92	×	21.36%	×	0.85	×	3.08
Mar 31, 2015	58.88%	=	0.78	×	0.94	×	28.07%	×	0.89	×	3.20
Dec 31, 2014	43.20%	=	0.78	×	0.94	×	27.65%	×	0.82	×	2.59
Sep 30, 2014	—	=	—	×	—	×	—	×	—	×	2.44
Jun 30, 2014	—	=	—	×	—	×	—	×	—	×	2.36
Mar 31, 2014	—	=	—	×	—	×	—	×	—	×	2.35

The primary reason for the increase in Return on Equity (ROE) over Q2 2019 is the increase in Financial Leverage.

Illinois Tool Works Inc., decomposition of ROA (quarterly data)

	ROA	=	Net Profit Margin	×	Asset Turnover

Jun 30, 2019	16.23%	=	17.17%	×	0.95
Mar 31, 2019	16.36%	=	17.21%	×	0.95
Dec 31, 2018	17.24%	=	17.36%	×	0.99
Sep 30, 2018	12.27%	=	12.69%	×	0.97
Jun 30, 2018	12.12%	=	12.70%	×	0.95
Mar 31, 2018	11.16%	=	12.36%	×	0.90
Dec 31, 2017	10.05%	=	11.79%	×	0.85
Sep 30, 2017	13.91%	=	16.12%	×	0.86
Jun 30, 2017	13.60%	=	15.50%	×	0.88
Mar 31, 2017	13.54%	=	15.24%	×	0.89
Dec 31, 2016	13.39%	=	14.96%	×	0.89
Sep 30, 2016	12.59%	=	14.68%	×	0.86
Jun 30, 2016	12.84%	=	14.65%	×	0.88
Mar 31, 2016	12.37%	=	14.31%	×	0.86
Dec 31, 2015	12.07%	=	14.17%	×	0.85
Sep 30, 2015	11.79%	=	13.93%	×	0.85
Jun 30, 2015	11.74%	=	13.73%	×	0.85
Mar 31, 2015	18.39%	=	20.56%	×	0.89
Dec 31, 2014	16.66%	=	20.34%	×	0.82
Sep 30, 2014	—	=	—	×	—
Jun 30, 2014	—	=	—	×	—
Mar 31, 2014	—	=	—	×	—

The primary reason for the decrease in Return on Assets (ROA) over Q2 2019 is the decrease in Asset Turnover.

Illinois Tool Works Inc., decomposition of ROA (quarterly data)

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

Jun 30, 2019	16.23%	=	0.75	×	0.93	×	24.46%	×	0.95
Mar 31, 2019	16.36%	=	0.75	×	0.93	×	24.62%	×	0.95
Dec 31, 2018	17.24%	=	0.76	×	0.93	×	24.72%	×	0.99
Sep 30, 2018	12.27%	=	0.56	×	0.93	×	24.53%	×	0.97
Jun 30, 2018	12.12%	=	0.55	×	0.93	×	25.01%	×	0.95
Mar 31, 2018	11.16%	=	0.54	×	0.93	×	24.90%	×	0.90
Dec 31, 2017	10.05%	=	0.52	×	0.93	×	24.66%	×	0.85
Sep 30, 2017	13.91%	=	0.71	×	0.93	×	24.55%	×	0.86
Jun 30, 2017	13.60%	=	0.71	×	0.92	×	23.68%	×	0.88
Mar 31, 2017	13.54%	=	0.70	×	0.92	×	23.43%	×	0.89
Dec 31, 2016	13.39%	=	0.70	×	0.92	×	23.13%	×	0.89
Sep 30, 2016	12.59%	=	0.70	×	0.92	×	22.62%	×	0.86
Jun 30, 2016	12.84%	=	0.70	×	0.92	×	22.58%	×	0.88
Mar 31, 2016	12.37%	=	0.70	×	0.92	×	22.14%	×	0.86
Dec 31, 2015	12.07%	=	0.70	×	0.92	×	21.97%	×	0.85
Sep 30, 2015	11.79%	=	0.70	×	0.92	×	21.66%	×	0.85
Jun 30, 2015	11.74%	=	0.70	×	0.92	×	21.36%	×	0.85
Mar 31, 2015	18.39%	=	0.78	×	0.94	×	28.07%	×	0.89
Dec 31, 2014	16.66%	=	0.78	×	0.94	×	27.65%	×	0.82
Sep 30, 2014	—	=	—	×	—	×	—	×	—
Jun 30, 2014	—	=	—	×	—	×	—	×	—
Mar 31, 2014	—	=	—	×	—	×	—	×	—

The primary reason for the decrease in Return on Assets (ROA) over Q2 2019 is the decrease in operating profitability measured by EBIT Margin.

Illinois Tool Works Inc., decomposition of Net Profit Margin (quarterly data)

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

Jun 30, 2019	17.17%	=	0.75	×	0.93	×	24.46%
Mar 31, 2019	17.21%	=	0.75	×	0.93	×	24.62%
Dec 31, 2018	17.36%	=	0.76	×	0.93	×	24.72%
Sep 30, 2018	12.69%	=	0.56	×	0.93	×	24.53%
Jun 30, 2018	12.70%	=	0.55	×	0.93	×	25.01%
Mar 31, 2018	12.36%	=	0.54	×	0.93	×	24.90%
Dec 31, 2017	11.79%	=	0.52	×	0.93	×	24.66%
Sep 30, 2017	16.12%	=	0.71	×	0.93	×	24.55%
Jun 30, 2017	15.50%	=	0.71	×	0.92	×	23.68%
Mar 31, 2017	15.24%	=	0.70	×	0.92	×	23.43%
Dec 31, 2016	14.96%	=	0.70	×	0.92	×	23.13%
Sep 30, 2016	14.68%	=	0.70	×	0.92	×	22.62%
Jun 30, 2016	14.65%	=	0.70	×	0.92	×	22.58%
Mar 31, 2016	14.31%	=	0.70	×	0.92	×	22.14%
Dec 31, 2015	14.17%	=	0.70	×	0.92	×	21.97%
Sep 30, 2015	13.93%	=	0.70	×	0.92	×	21.66%
Jun 30, 2015	13.73%	=	0.70	×	0.92	×	21.36%
Mar 31, 2015	20.56%	=	0.78	×	0.94	×	28.07%
Dec 31, 2014	20.34%	=	0.78	×	0.94	×	27.65%
Sep 30, 2014	—	=	—	×	—	×	—
Jun 30, 2014	—	=	—	×	—	×	—
Mar 31, 2014	—	=	—	×	—	×	—

The primary reason for the decrease in Net Profit Margin over Q2 2019 is the decrease in operating profitability measured by EBIT Margin.

Illinois Tool Works Inc. (ITW)

DuPont Analysis: Decomposition of ROE
Quarterly Data