CHAPTER 7
The DuPont Model
Introduction to the DuPont Model
THE PURPOSE of this chapter is to discuss the DuPont Model and its use in the operational filter. This model has been used to detect the drivers of change in financial performance. The model is also an excellent tool for a forward-looking assessment of Strategic Alternatives. The DuPont Model was originally developed in 1919 by a finance executive at E.I. du Pont de Nemours and Co. of Wilmington, Delaware, for financial planning and control purposes. The DuPont system helps many companies understand the critical building blocks in return on assets (ROA) and return on equity (ROE).
Return on assets is a measure of the productivity of assets. Assets appear on your balance sheet. They ...
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