Course · Act III: Reading the Numbers · Act III case study
DuPont analysis: comparing two companies
Case study: a software company and a supermarket chain reach the same return on equity by very different routes. Break it down with DuPont analysis and operating leverage.
Key terms
- DuPont analysis
- ROE = net margin × asset turnover × (assets ÷ equity). Shows how a return is earned.
- Operating leverage
- With fixed costs, a small change in sales causes a bigger change in operating profit. Worse with thin margins.
“SaaS vs. Supermarket” is part of the full course: 5 puzzles on dupont analysis: comparing two companies, with a story that carries through all five acts. Try this act’s free chapter, “Margins”, first.