Editing DuPont analysis (section)

==ROE analysis==
The DuPont analysis breaks down ROE (that is, the returns that investors receive from a single dollar of equity) into three distinct elements. This analysis enables the manager or analyst to understand the source of superior (or inferior) return by comparison with companies in similar industries (or between industries). See {{slink|Return on equity#The DuPont formula}} for further context.

The DuPont analysis is less useful for industries such as investment banking, in which the underlying elements are not meaningful (see related discussion: {{slink|Valuation (finance)#Valuing financial services firms}}). Variations of the DuPont analysis have been developed for industries where the elements are weakly meaningful,{{cn|date=February 2019}} for example:

===High margin industries===
Some industries, such as the [[fashion industry]], may derive a substantial portion of their income from selling at a higher margin, rather than higher sales. For high-end fashion brands, increasing sales without sacrificing margin may be critical. The DuPont analysis allows analysts to determine which of the elements is dominant in any change of ROE. 

===High turnover industries===
Certain types of [[retail]] operations, particularly stores, may have very low profit margins on sales, and relatively moderate leverage. In contrast, though, groceries may have very high turnover, selling a significant multiple of their assets per year. The ROE of such firms may be particularly dependent on performance of this metric, and hence asset turnover may be studied extremely carefully for signs of under-, or, over-performance. For example, [[same-store sales]] of many retailers is considered important as an indication that the firm is deriving greater profits from existing stores (rather than showing improved performance by continually opening stores).

===High leverage industries===
Some sectors, such as the [[financial sector]], rely on high leverage to generate acceptable ROE. Other industries would see high levels of leverage as unacceptably risky. DuPont analysis enables third parties that rely primarily on their financial statements to compare leverage among similar companies.