What is the DuPont formula?

ROE = (net income ÷ revenue) × (revenue ÷ average assets) × (average assets ÷ average equity).

What is the 5-step DuPont analysis?

ROE = tax burden × interest burden × operating margin × asset turnover × equity multiplier.

Why use DuPont analysis?

It shows whether ROE comes from profitability, efficiency or leverage, which a single ROE figure hides.

Should I use average or year-end balances?

Average balances are more accurate because income is earned over the whole year; be consistent across companies.

DuPont Analysis Formula (ROE Breakdown)

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DuPont Analysis Calculator (3-Step and 5-Step ROE)

DuPont analysis breaks return on equity into the parts that drive it, so you can see why ROE is high or low. The three-step version multiplies net profit margin (profitability), asset turnover (efficiency) and the equity multiplier (leverage). Because revenue and assets cancel out, the product is exactly net income ÷ equity.

Formula

ROE = Net incomeRevenue × RevenueAvg. assets × Avg. assetsAvg. equity
5-step: ROE = NIEBT × EBTEBIT × EBITRevenue × RevenueAssets × AssetsEquity

Where

Net income ÷ Revenue: net profit margin (profitability)
Revenue ÷ Assets: asset turnover (efficiency)
Assets ÷ Equity: equity multiplier (leverage)
NI ÷ EBT: tax burden
EBT ÷ EBIT: interest burden
EBIT ÷ Revenue: operating margin

Calculator

Net income

Revenue

Average total assets

Average shareholders' equity

Earnings before tax (EBT)

Needed for the 5-step version.

EBIT (operating income)

Needed for the 5-step version.

Result and step-by-step solution

Return on equity

30%

Margin 18% × turnover 0.667 × leverage 2.5. Without leverage (ROA) the return would be 12%.

Net profit margin
90,000.00500,000.00 = 0.18
Asset turnover
500,000.00750,000.00 = 0.666667
Equity multiplier
750,000.00300,000.00 = 2.5
3-step ROE
0.18 × 0.666667 × 2.5 = 30%
5-step breakdown
Tax burden (NI ÷ EBT) 0.75
Interest burden (EBT ÷ EBIT) 0.8
Operating margin (EBIT ÷ Revenue) 0.3
Asset turnover 0.6667
Equity multiplier 2.5
Product = ROE 30%

Tax burden (NI ÷ EBT)	0.75
Interest burden (EBT ÷ EBIT)	0.8
Operating margin (EBIT ÷ Revenue)	0.3
Asset turnover	0.6667
Equity multiplier	2.5
Product = ROE	30%

How to use the formula

The five-step version splits the margin further into the tax burden (net income ÷ earnings before tax), the interest burden (earnings before tax ÷ EBIT) and the operating margin (EBIT ÷ revenue). That separates the effect of taxes and borrowing costs from how well the business operates.

In the example, net margin is 18%, asset turnover 0.667 and the equity multiplier 2.5, giving an ROE of 30%. Without leverage, the return on assets would be 12%. The five-step breakdown shows a tax burden of 0.75, an interest burden of 0.80 and an operating margin of 30%. Two companies with the same ROE can look very different underneath: one may earn it through high margins, another through heavy debt. Each factor has its own page, such as net profit margin, asset turnover and equity multiplier.

Frequently asked questions

What is the DuPont formula?: ROE = (net income ÷ revenue) × (revenue ÷ average assets) × (average assets ÷ average equity).
What is the 5-step DuPont analysis?: ROE = tax burden × interest burden × operating margin × asset turnover × equity multiplier.
Why use DuPont analysis?: It shows whether ROE comes from profitability, efficiency or leverage, which a single ROE figure hides.
Should I use average or year-end balances?: Average balances are more accurate because income is earned over the whole year; be consistent across companies.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.