Pyramid Analysis

Question 1

What does the Dupont Pyramid provide?

Answer 1

A structured approach to understanding the factors driving a company’s profitability and efficiency.

Question 2

Return on Equity

Answer 2

Return on assets = Net Income/Total Assets X Financial Leverage (Total Assets/Total Equity)

Question 3

What can return on assets be broken down into?

Answer 3

Net profit Margin (Net Income/Revenues) X Total Asset Turnover (Revenues/Total Assets)

Question 4

What are the three levers of Net Profit Margin (Net Income/Revenues)

Answer 4

Tax Burden (Net Income/Earnings Before Tax) X Interest Burden (Earnings before tax/Earnings before interest and tax) X Operating Profit Margin (Earnings Before Interest and Tax/Revenue)