DU PONT ANALYSIS

The Du Pont Company of the US developed a system of financial

analysis which has got good recognition and acceptance.
Analyzing return ratios in terms of profit margin and turnover
ratios, it is referred as the Du Pont System. It integrates elements
of the income statement with those of balance sheet.

DuPont analysis tells us that ROE is affected by three things:

• Operating efficiency, which is measured by profit margin

• Asset use efficiency, which is measured by total asset

turnover
• Financial leverage, which is measured by the equity
multiplier

ROE = Profit Margin (Profit/Sales) * Total Asset Turnover

(Sales/Assets) * Equity Multiplier (Assets/Equity
If ROE is unsatisfactory, the DuPont analysis helps locate the part
of the business that is underperforming.
Steps in DuPont Analysis:
1. Collect the data
2. Calculate the required ratios (using spreadsheet)
3. Draw conclusions
4. If conclusions are unrealistic, calculate again and check for the
authenticity of the data
In the Dupont Analysis we try to find out what are the
factors/drivers that are causing the profits to move up. By
identifying these factors/drivers we can concentrate on them and
improve our efficiency.
 Profit and loss account
Year 2008 2007 2006 2005 2004
INCOME :
364.6 612.8 689.3 585.2 548.3
Sales Turnover 6 6 4 5 7
Excise Duty 4.96 5.69 18.55 18.44 18.44
607.1 670.7 566.8 529.9
Net Sales 359.7 7 9 1 3
Other Income 10.41 12.31 13.57 7.24 13.82
-10.8
Stock Adjustments 6 17.81 -1.14 12.03 4.3
359.2 637.2 683.2 586.0 548.0
Total Income 5 9 2 8 5
EXPENDITURE :
224.4 414.0 421.1 347.1 322.8
Raw Materials 8 3 4 9 1
Power & Fuel Cost 2.99 4.52 12.24 8.67 7.67
Employee Cost 23.97 31.8 31.02 37.67 34.06
Other Manufacturing Expenses 17.07 31.52 42.06 43.49 39.89
Selling and Administration
Expenses 49.74 77.59 73.5 88.15 76.73
Miscellaneous Expenses 8.32 6.56 27.89 13.99 22.25
Less: Pre-operative Expenses
Capitalised 0 0 0 0.47 0
326.5 566.0 607.8 538.6 503.4
Total Expenditure 7 2 5 9 1
Operating Profit 32.68 71.27 75.37 47.39 44.64
Interest 9.02 10.2 13.47 12.59 10.99
Gross Profit 23.66 61.07 61.9 34.8 33.65
Depreciation 6.26 6.66 9.16 9.79 9.18
Profit Before Tax 17.4 54.41 52.74 25.01 24.47
Tax 2.84 9.86 12.57 7.78 7.07
Deferred Tax 0.41 0.4 -0.23 0.86 -0.05
Reported Net Profit 13.72 43.61 39.63 16.36 17.45
Extraordinary Items -2.11 2.46 -2.42 -0.4 1.42
Adjusted Net Profit 15.83 41.15 42.05 16.76 16.03
Adjst. below Net Profit 2.68 -2.52 -0.78 -0.63 -0.1
-34.0 -53.2
P & L Balance brought forward 21.63 25.02 -6.37 1 6
Statutory Appropriations 0 0 0 0 0
Appropriations 7.61 8.52 4.89 17.53 13.04
-35.8 -48.9
P & L Balance carried down 30.42 57.59 27.59 1 5
Dividend 3.01 3.08 4.17 4.05 2.46
Preference Dividend 0 0 0 0 2.05

Aggregate Balance sheet

Year 2008 2007 2006 2005 2004
SOURCES OF FUNDS :
229.1 236.5 245.3
Share Capital 36.77 8 7 227.2 3
159.0 233.8 179.1
Reserves Total 4 6 3 94.29 79.25
195.8 463.0 321.4 324.5
Total Shareholders Funds 1 4 415.7 9 8
119.5 103.3
Secured Loans 77.96 6 6 89.08 89.84
Unsecured Loans 12.54 15.47 20.87 64.4 33.73
135.0 124.2 153.4 123.5
Total Debt 90.5 3 3 8 7
286.3 598.0 539.9 474.9 448.1
Total Liabilities 1 7 3 7 5
APPLICATION OF FUNDS :
146.5 180.0 205.9 193.7
Gross Block 7 145.3 6 1 6
Less : Accumulated Depreciation 31.81 39.88 56.11 54.53 60.58
114.7 105.4 123.9 151.3 133.1
Net Block 6 2 5 8 8
Lease Adjustment 0 0 0 0 0
Capital Work in Progress 17.15 63.48 26.24 10.9 3.01
 163.9 156.4 152.1
Investments 18.15 9 8 156.6 2
Current Assets, Loans & Advances
119.3 136.7 119.2 102.3
Inventories 51.99 8 7 3 4
109.4 126.4
Sundry Debtors 50.03 7 8 88.77 96.46
Cash and Bank 45.15 65.89 53.93 19.28 25.15
117.2 105.9
Loans and Advances 93.21 4 8 81.09 80.24
240.3 411.9 423.1 308.3 304.1
Total Current Assets 8 8 6 7 9
Less : Current Liabilities and
Provisions
117.7 155.4 138.7
Current Liabilities 69.5 6 2 139.4 1
Provisions 32.21 31.29 37.11 23.21 19.24
101.7 149.0 192.5 162.6 157.9
Total Current Liabilities 1 5 3 1 5
138.6 262.9 230.6 145.7 146.2
Net Current Assets 7 3 3 6 4
Miscellaneous Expenses not
written off 1.11 5.77 7.26 15.25 17.82
Deferred Tax Assets 2.1 1.3 2.27 1.46 1.74
Deferred Tax Liability 5.63 4.82 6.9 6.38 5.96
Net Deferred Tax -3.53 -3.52 -4.63 -4.92 -4.22
286.3 598.0 539.9 474.9 448.1
Total Assets 1 7 3 7 5