## DuPont Identity or DuPont Model Formula

Profit Margin = Net income / Net Sales

Total Asset Turnover = Net Sales / Total Assets

Financial Leverage = Total Assets / Total equity

Return on Equity (ROE) = Profit Margin x Total Asset Turnover x Financial Leverage

Return on Assets (ROA) = Profit Margin x Total Asset Turnover

### Example

Year1 | year2 | |
---|---|---|

Net Income | $1000 | $1200 |

Net Sales | $10,000 | $10,000 |

Profit Margin |
0.1 | 0.12 |

Net Sales | $10,000 | $10,000 |

Total Assets | $5,000 | $4,800 |

Turnover |
2 | 2.08 |

Total Assets | $5,000 | $4,800 |

Equity | $2,000 | $2,000 |

Financial Leverage |
2.5 | 2.4 |

ROE | 50% | 60% |