# Dupont Analysis : Examples and know how

0
137 We will study all there is to know about Dupont Analysis today.

Dupont Analysis, also known as DuPont Identity or DuPont Model, is a financial analysis method used to assess a company’s return on equity (ROE). It breaks down ROE into three key components:

## Steps to do Dupont analysis :

1 : This component represents the company’s ability to generate profit from its sales.

It is calculated as: `NPM = Net Income / Total Revenue`

2. Asset Turnover (AT): Asset turnover measures how efficiently a company uses its assets to generate sales. It is calculated as:

`AT = Total Revenue / Average Total Assets `

3. Financial Leverage (FL): Financial leverage assesses how much the company relies on debt to finance its operations.

It is calculated as: `FL = Average Total Assets / Average Shareholders' Equity `

## The formula for calculating Return on Equity (ROE) using the DuPont Analysis is:

`ROE = NPM x AT x FL `

## Dupont Analysis Example :

Let’s use Visa as an example using Sep22 numbers, everything in millions: