DuPont analysis

The decomposition of ROE as the product of other financial ratios  to evaluate the drivers of ROE.

$ROE = \frac{Net income}{Avg total assets}\times \frac{Avg total assets}{Avg total equity}$

$ROE = \frac{Net income}{Revenue}\times \frac{Revenue}{Avg total assets}\times \frac{Avg total assets}{Avg total equity}$

$ROE = \frac{Net income}{EBT}\times \frac{EBT}{EBIT}\times \frac{EBIT}{Revenue}\times \frac{Revenue}{Avg total assets}\times \frac{Avg total assets}{Avg total equity}$

ROE = Tax burden x Interest burden x EBIT margin x Total asset turnover x Financial leverage