DuPont Analysis
Capital Markets Financial Model (Free Excel Download)
Decompose return on equity into profit margin, asset turnover, and financial leverage to diagnose operating performance and compare business quality over time.
professionals from Deloitte
Used by professionals from
About this model
A DuPont analysis template decomposes Return on Equity into the operating, asset-efficiency, and financing levers that produce it, then benchmarks each lever against a peer set in the current year. The model carries five years of company financials and a four-peer comparison, computes both the classic 3-step and the extended 5-step decomposition, and reconciles each year against a direct NI / Equity reference within a user-set tolerance band.
The Assumptions sheet holds a base year input, five years of company P&L (revenue, COGS, operating expenses, D&A, interest expense, tax expense), five years of company balance sheet (total assets, total equity), four peer columns with the same six financial lines (sales, EBIT, EBT, net income, total assets, total equity), and a tolerance value. The Inputs_Summary sheet pulls every line through, derives EBIT as revenue minus operating costs, EBT as EBIT minus interest, and net income as EBT minus tax, with formula-driven year labels keyed off the base year input.
The DuPont_3Step sheet computes Net Margin (NI / Revenue), Asset Turnover (Revenue / Total Assets), and Equity Multiplier (Total Assets / Total Equity) across all five years, multiplies them to derive a 3-step ROE, and runs a residual row against NI / Total Equity. The DuPont_5Step sheet extends the decomposition with Tax Burden (NI / EBT), Interest Burden (EBT / EBIT), and EBIT Margin (EBIT / Revenue), multiplies all five terms, and runs a residual row against the 3-step ROE - proving the algebraic identity Net_Margin = Tax_Burden x Interest_Burden x EBIT_Margin cell by cell.
The Peer_Compare sheet drops the company's latest year alongside four peers and a peer-average column, computes the full 5-step decomposition and ROE for every entity, and surfaces where the company is above or below the peer set on each driver. The Summary sheet rolls the latest-year decomposition, a five-year ROE trend, a peer-vs-company spread block per driver, and a reconcile status cell that prints Reconciles or Off based on ABS(residual) versus tolerance. Equity analysts, credit officers, corporate-finance teams, and MBA / CFA students use the workbook for idea generation, credit diagnostics, and teaching the DuPont identity.
What every model includes
Live formulas, no hardcoded values
Outputs are driven by live formulas, so the workbook updates from its assumptions instead of relying on hardcoded results.
All assumptions in one tab
Inputs are clearly marked in the Assumptions tab and separated from calculations, making it clear what to change and what to leave intact.
Statements always balancing
For integrated-statement models, the balance sheet, cash flow, and supporting schedules tie through properly.
Distinct schedules for clarity
Debt, working capital, taxes, and cash flow can get messy quickly. We group calculations in clear schedules, not across disconnected tabs.
No hidden macros or external links
There are no unexplained external workbook links or macros to undermine auditability or portability.
Changes flow through the model
Update a key driver and see the impact carry through the forecast, financing, and return outputs. We never use hardcoded numbers in formulas.
What's inside the DuPont Analysis
- Five-year company P&L inputs (revenue, COGS, opex, D&A, interest, tax) and balance sheet (total assets, total equity)
- Inputs_Summary sheet that derives EBIT, EBT, and net income line-by-line with formula-driven year labels
- DuPont_3Step: Net Margin x Asset Turnover x Equity Multiplier with a NI / Equity residual check
- Peer_Compare: company current year versus four peers with a Peer Avg column
- Summary with latest-year drivers, 5-year ROE trend, peer-vs-company spread per driver, reconcile status
- Customisable assumptions for your own case
DuPont Analysis: How the Model Decomposes Return on Equity
This DuPont analysis template breaks down Return on Equity into its operating, asset-efficiency, and financing components, using both the classic three-step and the extended five-step identities over a five-year horizon. It includes parallel ROIC decomposition, segment views, peer benchmarking, sensitivity grids, and reconciliation checks, giving analysts a clear view of which levers drive returns.
Operating Drivers Behind the Decomposition
The model separates ROE into five operating and financing drivers. Tax Burden measures profit retained after tax, while Interest Burden shows the share of EBIT kept after interest expense.
- EBIT Margin captures operating profitability, Asset Turnover reflects revenue generated per dollar of assets, and Equity Multiplier indicates balance sheet leverage. Together these show whether returns come from profitable operations, efficient asset use, or financial leverage.
- The three-step version collapses the first three into Net Margin.
How the Calculation Flows Through the Model
Inputs are entered on the Assumptions sheet, including scenario selection, industry benchmarks, and the choice between end-of-period and average balance conventions.
- The Inputs_Summary sheet consolidates P&L and balance sheet data, computes average balances, and provides EBIT, EBT, and net income figures.
- The DuPont sheets then apply the multiplicative formulas year by year, referencing those inputs.
- The balance convention toggle changes asset turnover and equity multiplier to use either closing or average balances, affecting how growth companies are assessed.
Outputs and Reconciliation Checks
The model produces per-year ROE from both three-step and five-step decompositions, an ROIC variant that removes capital structure effects, segment-level five-step views for three regions, and a driver bridge showing contributions from year one to year five.
- The Checks sheet contains 62 PASS/FAIL formulas covering residual tolerances, equity positivity, interest coverage, tax and interest burden ranges, peer integrity, and bridge reconciliation.
- These checks verify the algebraic identities and flag data issues.
Practical Use for Evaluating Drivers
This template is built for equity analysts, credit officers, and CFOs who need to identify which lever moved ROE and compare it to industry bands and peers.
- The Summary sheet provides verdicts against sector benchmarks and peer means.
- Sensitivity grids show how ROE responds to changes in EBIT margin, asset turnover, equity multiplier, and net margin.
- Scenario toggles for Base, Bull, and Bear illustrate how drivers can move adversely under stress, but the model does not predict outcomes.
Formatted to IB standards
Named theme colors repaint the whole workbook in one click, on top of an investment-banking structure with clear input, output, and cross-sheet reference styling - brand-ready, institutional-grade, and fully auditable.
Created by ex-finance professionals
Hey, I’m Alex and I created Finamodel.
Over my years in the finance industry I kept building the same models over and over again. Same structure, same assumptions, different logo. So I started building frameworks to turn them into clean, reusable templates.
Every model here is one I’d actually use for a client, and I personally vet each one before it goes up.
I’m not an expert in every industry, but I’ve built enough models to know what belongs in one. And when something is completely foreign to me, I reach out to my network for experts to work on our models with us.
Having a template library on hand cuts a first build from hours to minutes.
Need help finding your model? You’ll find me in the Finamodel app!
Frequently asked
What is DuPont analysis?+
DuPont analysis decomposes Return on Equity into the operating, asset-efficiency, and financing levers that produce it. The 3-step identity is ROE = Net Margin x Asset Turnover x Equity Multiplier; the 5-step identity extends it to Tax Burden x Interest Burden x EBIT Margin x Asset Turnover x Equity Multiplier. Together they let an analyst answer which lever is doing the work behind a headline ROE number.
Does this use end-of-period or average balances?+
End-of-period throughout. End-of-period is simpler, common in textbooks and equity research, and avoids the opening-balance dependency in Y1. To switch to average balances, replace each Total_Assets and Total_Equity reference in the turnover and leverage formulas with AVERAGE of the prior and current period and add a Y0 column to the inputs.
Why is Tax Burden a ratio rather than the tax rate?+
Tax Burden is the keep ratio: Net Income / EBT. A profitable company always has Tax Burden between 0 and 1 (it cannot keep more than 100% of pretax income). Effective tax rate is the complement: 1 minus Tax Burden. The model uses the keep-ratio convention because that is what multiplies through the DuPont identity.
Can I swap in different peers?+
Yes. Peer names are inputs in the Assumptions sheet, and the six financial lines per peer (sales, EBIT, EBT, net income, total assets, total equity) flow straight into Peer_Compare. Pre-screen peers for fiscal calendar and accounting standard so the asset turnover and equity multiplier comparisons are like-for-like.
What does the residual check actually test?+
On the 3-step sheet, residual equals ROE_3Step minus NI / Total_Equity. By construction it must be zero. On the 5-step sheet, residual equals ROE_5Step minus ROE_3Step, which is zero by the algebraic identity Net_Margin = Tax_Burden x Interest_Burden x EBIT_Margin. A non-zero residual outside tolerance is the signal that a formula has been changed, a row reference has drifted, or an opening balance has crept in.
Have more financial modelling questions? Contact us
Related templates
Financial Health Dashboard
12-month liquidity, solvency, profitability, and efficiency ratio dashboard.
3 Statement Model
Integrated income statement, balance sheet, and cash flow forecasts.
Comparable Companies Analysis
Pull trading multiples from peer companies and calculate implied valuation ranges.
DCF Model
Discounted cash flow valuation model with explicit forecast, terminal value, and WACC.
