Du Pont Analysis

Presented by: Group 3AArifAditi

DeepakRushit

SushantShreeram

April 10, 2023

Du Pont Analysis• Analysis based on establishing a relevant financial relationship between components of

financial statements.

• A tool to examine a company's Return on Equity (ROE).• ROE is broken into two parts: ROA and Equity Multiplier• ROA is further drilled to Margin Ratios and Turnover ratios.• Higher the RoE, more favourable is the organization.• Margin Ratios: This ratio, also known as return as sales (ROS), measures the amount

of

net profit earned by each dollar of revenue. It is computed as: Profit after Tax / Sales.• Turnover Ratios: This is a measure of the efficiency with which assets are utilized. It

indicates how many times the assets were turned over in a period. It is computed as:

Sales / Total Assets• Gearing/Leverage Ratios: This is a measure of profitability from a given level of

investment. It is computed as: Total Assets / Owners Equity

• This method returns a higher ROI because assets are measured at their gross book value

rather than at net book value.

Du Pont Analysis

Turn Over RatiosMargin Ratios Leverage Ratios

SalesNet Profit

Sales Total Assets

Total Assets

Owner’s Equity

Net ProfitReturn on Equity = (ROE) Owner’s Equity

Du Pont Analysis of Nestle for the FY 2007-08Du Pont analysis of Nestle for FY 2007 & 2008

   

  ROE 0.35 0.21  

Information 2008 2007 Information 2008 2007 Information 2008 2007

Net Profit After Tax 19,051 11,382 Total Assets 1,06,215 1,15,361 Owner's Equity 54,916 54,776

Total Sales 1,09,908 1,07,552 N.C. Assets 73,167 79,591 Total Liablities 51,299 60,585

COGS 47,339 45,037 Current Assets 33,048 35,770 Current Liabilities 33,223 43,326

Marketing and Admin Exp 35,832 36,512 Inventory 9,342 9,272 Non Current Liabilities 18,076 17,259

Distribution expenses  42,202 40,716 AR 13,442 14,890 Trade and Other payables 12,608 14,179

PBIT 22,978 14,434 Cash 5,835 6,594 Financial Liabilities 15,383 24,541

Taxes 3,787 3,416 Goodwill 30,637 33,423  

Research and development costs  1,977 1,875 PPE 21,097 22,065  

  Intangible Assests 6,867 7,217  

         

   

Margins Turnover Gearing/Leverage

Ratio 2008 2007 Ratio 2008 2007 Ratio 2008 2007

Net Profit/Total Sales 0.17 0.11 Sales/Total Assets 1.03 0.93 Total Assets/Owners Equity 1.93 2.11

COGS/Total Sales 0.43 0.42 Sales/NCA 1.50 1.35 Total Liabilities/Total Assets 0.48 0.53

Mktng & Admin Exp./ Total Sales 0.33 0.34 Sales/CA 3.33 3.01 Total Liabilites/ Owners Equity 0.93 1.11

Distribution Exp./ Total Sales 0.38 0.38 Sales/INVENTORY 11.76 11.60 Current Assets/Current Liabilities 0.99 0.83

PBIT/Total Sales 0.21 0.13 Sales/AR 8.18 7.22 PAT/Non Current Liabilities 1.05 0.66

Taxes/Total Sales 0.03 0.03 Sales/Cash 18.84 16.31 Non Current Assets /OE 1.33 1.45

R&D/Total Sales 0.02 0.02 Sales/GOODWILL 3.59 3.22 Equity Ratio 0.52 0.47

  Sales/PPE 5.21 4.87  

  Sales/IA 16.01 14.90  

                 

Du Pont Analysis of Cadbury for the FY 2007-08DU Pont Analysis of Cadbury's for FY 2007 & 2008

Return on Owner's Equity 0.10 0.10

Information 2008 2007 Information 2008 2007 Information 2008 2007

Net Profit After Tax 366 405 Total Assets 8,895 11,338 Owner's Equity 3,522 4,162

Total Sales 5,384 4,699 Non Current Assets 5,990 8,667 Total Liablities 5,264 7,147

COGS 4,996 4,423 Property plant & equip. 1,761 1,904 Long Term Debt 1,876 2,533

Operation profit 388 278 Goodwill 2,288 2,805 Current Liabilities 3,388 4,614

EBIT 398 286 Intangible Assets 1,685 3,527 AP 1,551 1,701

Interest Expense 50 88 Current Assets 2,905 2,671  

EBT 400 254 Inventory 767 821  

Tax Expense 30 105 Cash 251 493  

      AR 1,067 1,197      

   

Margins Turnover Gearing/Leverage

Ratio 2008 2007 Ratio 2008 2007 Ratio 2008 2007

Net Profit After Tax/Sales 0.07 0.09 Sales/Total Assets 0.61 0.41 Total Assets/O Equity 2.53 2.72

COGS/Sales 0.93 0.94 Sales/Net Current Assets 0.90 0.54 Total Liabilties/Total Assets 0.59 0.63

Operating Profit/Sales 0.07 0.06 Sales/Property plant & equip 3.06 2.47 Current Assets/Current Liabiltieis 0.86 0.58

EBIT/Sales 0.07 0.06 Sales/Goodwill 2.35 1.68 Total Liabilities/O equity 1.70 2.08

Interest Expense/Sales 0.01 0.02 Sales/Intangible assets 3.20 1.33 Long term debt/O Equity 0.50 0.46

EBT/Sales 0.07 0.05 Sales/Current Assets 1.85 1.76 Equity Ratio 0.40 0.37

Tax Expense/Sales 0.01 0.02 Sales/Inventory 7.02 5.72  

  Sales/Cash 21.45 9.53  

  Sales/AR 5.05 3.93  

   

                 

Comparison b/w Nestle & Cadbury’s 2008…

Net Profit/Total Sales

COGS/Total Sales

PBIT/Total Sales

Taxes/Total Sales

0.00

0.100.200.300.400.500.600.700.800.901.00

0.07

0.93

0.070.01

0.17

0.43

0.21

0.03

Margin Ratios

CadburyNestle

Sales

/Tot

al A

sset

s

Sales

/NCA

Sales

/CA

Sales

/INVE

NTORY

Sales

/AR

Sales

/Cas

h

Sales

/GOODW

ILL

Sales

/PPE

Sales

/IA

0.00

3.00

6.00

9.00

12.00

15.00

18.00

21.00

0.61 0.901.85

7.02

5.05

21.45

2.353.06 3.201.03 1.50 3.33

11.76

8.18

18.84

3.595.21

16.01

Turn Over Ratio

Cadbury Nestle

T Assets/O Equity T Liabilities/T Assets T Liabilites/ O Equity C Assets/C Liabilities Equity Ratio0.00

0.50

1.00

1.50

2.00

2.50

3.002.53

0.59

1.70

0.86

0.40

1.93

0.48

0.93 0.990.47

Gearing Ratio

Cadbury

Nestle

Cadbury Nestle

ROE 0.103918228279387 0.35

0.03

0.08

0.13

0.18

0.23

0.28

0.33

0.38

ROE

Observations

• ROOE for the FY 2008 is 0.35; an increase from the last year’s value of 0.21. Attributed mainly to the increase in margins and turnover.

• Net profit margin increased from 0.11 to 0.17 indicating higher profit for every single

dollar revenue it generates.

• Turnover registered with respect to assets, inventory and cash implying their better

utilization.

• The decrease in debt ratio and debt equity ratio shows that company is working

towards paying off its debts.

• The liquidity ratio has improved showing that the company has improved liquidity.

804/10/2023