Dr. Paul Borosky, DBA, MBA
Business Consultant & Author
Guide 33 of 34 · Putting It Together
DuPont Analysis Explained (Apple Example)
One ratio, three moving parts.
Return on equity tells you how much the owners earn. It does not tell you why. The DuPont method, built almost a hundred years ago at the DuPont company, splits ROE into profit margin, asset turnover, and leverage. Run it on Apple and the famous 152% tells a very different story.
Last Updated: 10/27/2026 · Written by Dr. Paul Borosky, DBA, MBA
The Short Answer
What Is DuPont Analysis?
Textbook Definition
DuPont analysis decomposes return on equity into three components: net profit margin, total asset turnover, and the equity multiplier (total assets divided by shareholders’ equity). Their product equals ROE.
In Plain English
ROE can be high for three reasons: the company keeps a lot of each sale, it sells a lot from what it owns, or it runs on very little owner money. DuPont tells you which reason is doing the work.
The DuPont Formula
Net Profit Margin × Total Asset Turnover × Equity Multiplier = ROE
Apple, fiscal 2025: 26.9% × 1.16 × 4.87 ≈ 152%
Each piece is a ratio you may already know. Margin comes from the income statement. Turnover links the income statement to the balance sheet. The equity multiplier comes entirely from the balance sheet. DuPont is where all three statements meet in one line.
One Real Company
Apple’s DuPont Breakdown, 2021 to 2025
Margin barely moved. Turnover barely moved. The equity multiplier swung from 4.87 to 6.96. That is where ROE’s big swings came from.
| Component | 2025 | 2024 | 2023 | 2022 | 2021 |
|---|---|---|---|---|---|
| Net profit margin | 26.9% | 24.0% | 25.3% | 25.3% | 25.9% |
| Total asset turnover | 1.16 | 1.07 | 1.09 | 1.12 | 1.04 |
| Equity multiplier | 4.87 | 6.41 | 5.67 | 6.96 | 5.56 |
| Return on equity | 152% | 165% | 156% | 197% | 150% |
Source: Apple Form 10-K filings, fiscal 2021 to 2025, as analyzed in the book.
The Method
How to Run a DuPont Analysis in 5 Steps
Calculate net profit margin.
Net income divided by sales. It measures how much of each sale the company keeps.
Calculate total asset turnover.
Sales divided by total assets. It measures how much the company sells from what it owns.
Calculate the equity multiplier.
Total assets divided by equity. It measures leverage. Healthy companies often sit around 2 or 3.
Multiply the three.
The product equals ROE. Check it against net income divided by equity.
Find the driver.
Compare each piece across years and against a rival. The one that moves, or stands out, is the real story.
What the Equity Multiplier Is Telling You
An equity multiplier of 5 to 7 is very high. At Apple it is not mainly from borrowing; Apple’s debt ratio fell from 35.5% to 27.5%. It comes from a tiny equity base created by years of buybacks, which pushed retained earnings negative. DuPont makes that visible in one row. Without the breakdown, you would credit the business for a return that the financing strategy produced.
Same Method, Different Company
Microsoft Through the Same X-Ray
Using the book’s fiscal 2025 figures for Microsoft, the three pieces line up very differently.
This is exactly what DuPont was built for. Two great companies, one ROE five times the other, and the method shows the gap comes mostly from how each one is financed, not from how good each business is.
Beginner Traps
What Do Beginners Get Wrong About DuPont Analysis?
- Stopping at ROE and never breaking it apart.
- Assuming a high equity multiplier always means heavy borrowing.
- Forgetting to check that the three parts multiply back to ROE.
- Comparing one piece across companies without the other two.
- Reading one year when equity swings with buybacks.
- Treating DuPont as a grade instead of a diagnosis.
How the Book Grades the Pieces
From the Book
Where the 152% Really Comes From
Putting the Ratios Together · The DuPont Method
A Thin Sliver
It is largely the product of a very small equity base, which the company created by buying back enormous amounts of its own stock.
The DuPont method is where every ratio in the book comes together. See it worked on five years of Apple numbers.
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DuPont works for a small business too: margin, how much you sell from your equipment, and how much of the business is borrowed. Start with your margins in gross margin vs. net margin. Want the full breakdown on your numbers? See fractional CFO services.
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DuPont Analysis Questions
What is the DuPont formula?
What does the equity multiplier tell you?
Why use DuPont analysis instead of just ROE?
What does DuPont show about Apple?
Written by Dr. Paul Borosky, DBA, MBA, business consultant, author, and adjunct finance instructor with an MBA focused in finance.
This page is for general educational purposes only. It is not investment, financial, tax, accounting, or legal advice, and nothing here is a recommendation to buy or sell any security. Apple and Microsoft figures come from their public filings as analyzed in the book. Apple and Microsoft are trademarks of their respective owners, and this page is not affiliated with or endorsed by either company.