Editing DuPont analysis (section)

{{Short description|Expression which breaks ROE (return on equity) into three parts}}
[[Image:DuPontModelEng.svg|400px|right|thumb|Graphical representation of DuPont analysis.]]
'''DuPont analysis''' (also known as the '''DuPont identity''', '''DuPont equation''', '''DuPont framework''', '''DuPont model''', '''DuPont method''' or '''DuPont system''') is a tool used in [[financial analysis]], where [[return on equity]] (ROE) is separated into its component parts.

Useful in several contexts, this "decomposition" of ROE allows [[financial manager]]s to focus on the key metrics of [[List of financial performance measures|financial performance]] individually, and thereby to identify strengths and weaknesses within the company that should be addressed.<ref name="Hargrave">Marshall Hargrave (2022). [https://www.investopedia.com/terms/d/dupontanalysis.asp Dupont Analysis], [[Investopedia]].</ref> Similarly, it allows [[securities research|investors]] to compare the [[Financial ratio #Profitability ratios|operational efficiency]] of two comparable firms.<ref name="Hargrave"/>

The name derives from the [[DuPont]] company, which began using this formula in the 1920s. A DuPont explosives salesman, [[Donaldson Brown]], submitted an internal efficiency report to his superiors in 1912 that contained the formula.<ref>{{cite news|last1=Phillips|first1=Matt|title=The DuPont invention that changed how things work in the corporate world|url=http://qz.com/569738/the-dupont-invention-that-forever-changed-how-things-work-in-the-corporate-world/|access-date=9 December 2015|work=[[Quartz (publication)]]|date=9 December 2015}}</ref>