DuPont analysis

DuPont analysis decomposes return on investment into two multiplicative components: return on sales multiplied by asset turnover.

Also known asDuPont

ByHoang TruongUpdated June 30, 2026

FrameworkDuPont analysis

What it is

See it move

Loading infographic...

The tree diagram decomposes ROI into two multiplicative branches connected by a multiplication operator: return on sales (operating profit divided by revenue) and asset turnover (revenue divided by invested capital). The same ROI figure can therefore arise from a high-margin, low-turnover strategy or from a low-margin, high-turnover one, and improving either branch independently will lift the root. The structure makes explicit that a manager diagnosing weak ROI must determine which lever — profitability or asset efficiency — is responsible.

The formula

LaTeX

\text{ROI} = \underbrace{\frac{\text{Operating Income}}{\text{Revenue}}}_{\text{ROS}} \times \underbrace{\frac{\text{Revenue}}{\text{Invested Capital}}}_{\text{Asset Turnover}}

Variables

$R O S$: Return on sales = Operating Income ÷ Revenue
$A sse tT u r n o v er$: Revenue ÷ Invested Capital

Revenue cancels, leaving Operating Income ÷ Invested Capital; splitting it exposes the two improvement levers

Check yourself

PracticeCORE

Division Kappa reports a return on sales of 4% and an asset turnover of 2.5 times. Division Lambda reports a return on sales of 10% and an asset turnover of 1.0 times. Which statement most accurately reflects the DuPont comparison of the two divisions?

Select an answer to check your understanding.