DuPont Financial Indicator Analysis Method

ROE’ = ROA × (1 − RT) = 9.41% × (1 − 13.74%) = 8.15% Leverage Ratio = Total Liabilities ÷ Shareholders’ Equity = 10,092,905 ÷ 5,191,444 = 1.944 Converted to Debt Ratio = 1.944 ÷ 2.944 = 66% Financing Interest Rate = Net Financing Cost ÷ Beginning-of-Period Total Liabilities × 100% = 76,535 ÷ 10,092,905 × 100% = 0.76% After-Tax Financing Interest Rate = Financing Interest Rate × (1 − RT) = 0.76% × (1 − 13.74%) = 0.66% Excess Return per Unit of Debt = ROE’ − After-Tax Financing Interest Rate = 8.15% − 0.66% = 7.49% As a textile enterprise, achieving an ROE of 22.63% indeed qualifies it as an outstanding company. In fact, over the past decade—except for one year of marginal profit—this company has consistently maintained an ROE above 20%. This stock delivered nearly a tenfold return to investors over that period. So, does it still hold investment value today? What are its primary risks? From the above financial analysis, we can see that the company’s current high profitability (ROE) stems primarily from its capital management capability. Although, as a textile enterprise, an after-tax asset return (ROE’) of 8% is already quite strong, its exceptional performance arises from superior capital management efficiency—whose return is nearly twice its core business ROE’. Can this advantage be sustained? The financial metrics calculated above reveal two distinctive features: an extremely low financing interest rate (only 0.76%) and a relatively low effective tax rate, coupled with a high financial leverage ratio (1.944). Our review of the financial reports shows that the low financing cost results mainly from the company’s heavy reliance on U.S. dollar-denominated debt, which carries an interest rate of approximately 3%. Moreover, last year’s U.S. dollar depreciation generated foreign exchange gains that offset two-thirds of its financing costs. This year, however, the U.S. dollar is appreciating, and U.S. dollar borrowing rates have risen significantly. Assuming the U.S. dollar interest rate rises by 1% on average year-on-year, and dollar appreciation causes foreign exchange losses equivalent to a 2% increase in effective financing cost, the company’s financing interest rate would exceed 6%. At the current tax rate, the after-tax financing interest rate would rise to 5.2%. With ROE’ unchanged, its capital management efficiency would decline sharply: ROE = ROE’ + (ROE’ − After-Tax Financing Interest Rate) × Financial Leverage Ratio = 8.15% + (8.15% − 5.2%) × 1.944 = 8.15% + 5.73% = 13.88% Although this textile enterprise remains fundamentally profitable, it may struggle to sustain its historically outstanding performance.

How is a company’s return on equity (ROE) calculated?

Two subsidiary departments each earned RMB 10 million last year. If we compare only this absolute profit figure, both departments appear equally successful. However, the resources they employed may differ substantially—for instance, one department used RMB 200 million in assets, while the other used only RMB 10 million. Thus, looking solely at ROE, the former yields just 5%, whereas the latter achieves 100%. The disparity becomes immediately apparent. ROE is the ultimate performance metric most closely watched by shareholders. It is widely reported that investment legend Warren Buffett typically considers only companies with an ROE exceeding 15%. 2. The Magic of Formula Transformation Mathematics offers magical formula transformations that help us better understand complex phenomena. Through such transformation, disciplines of management and financial management become interconnected and mutually reinforcing. The magic lies in decomposing the highly abstract financial concept of ROE into three intuitive metrics: • Product profitability — Net Profit Margin • Asset Turnover • Financial Leverage Return on Equity (ROE) equals the product of these three components. Each term in the formula represents a concrete, easily interpretable financial indicator—making it instantly clear where problems lie. Paradoxically, increasing the formula’s complexity yields greater conceptual clarity. This approach enables precise diagnosis: Is the business problem rooted in low profits, weak sales volume, or excessive (or insufficient) financial leverage? A higher net profit margin indicates stronger product-level profitability; a higher asset turnover ratio reflects robust sales volume, rapid asset turnover, efficient asset utilization, and minimal idle assets. This also explains why certain projects—even those operating at a loss—may still be pursued: because they accelerate cash flow cycles and sustain healthy working capital rotation. If asset return is low, the cause may be either a low sales profit margin, a low asset turnover ratio, or both. If the sales profit margin is low, possible reasons include pricing too low or excessively high costs. If the asset turnover ratio is low, improvements must target turnover—e.g., optimizing operational workflows. Leverage is a double-edged sword—use it with caution. 3. Performance Decomposition The decomposition process described above yields the renowned DuPont Formula. The diagram below illustrates the underlying logic of the DuPont framework: According to DuPont analysis, the ultimate objective for any enterprise is to maximize ROE—and ROE levels are primarily determined by sales profit margin and capital turnover rate. So how do we improve sales profit margin? Simply put: increase revenue and reduce expenses. In the words of Kazuo Inamori: “The principle of management is to maximize sales and minimize expenses.” 3.1 Gross Profit Thus emerges a critically important concept: gross profit. This is a key metric demanding our close attention.

Return on assets % of DuPont de Nemours, Inc. – SWB:6D8

Jul 9, 2026

DuPont de Nemours, Inc. displays its return on assets percentage on the Stuttgart Stock Exchange. Currently, the market is closed with no trades recorded on the platform.

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