Assessing competitors financial strengths and weaknesses : DuPont Analysis

Updated: Apr 21, 2019


The DuPont Analysis is a tool that may often help decision makers avoid misleading conclusions regarding a company’s profitability. The analysis was created in the 1920's by DuPont's management team to help assess the company's profitability.


This article suggests using the analysis to assess the strengths and weaknesses of either your competitors or target organisations in the case of mergers or acquisitions.


The video below, by the Corporate Finance Institute (CFI), gives a 30 second overview of the model. A deeper explanation of the model can be found here on their website.



Advantages and disadvantages of DuPont analysis



Advantages

Use the DuPont analysis to determine the strengths and weaknesses of a company. The model allows analysts to drill down and conduct a root cause analysis behind a companies strengths and weaknesses. This is critically important when assessing a suitable fit in either a merger or an acquisition.



Disadvantages

The main risk of the DuPont analysis is that it uses accounting data disclosed in financial statements. This information must be accurate. In cases of assessing public companies or not for profits that disclose their audited financials, this may not be too much of a risk, but it must be considered.



Download the model

Feel free to download the model by clicking here. This will take you to the download page (there's no email address required). Use the excel spreadsheet to conduct an analysis of your own organisation and track your performance over time, or to conduct an analysis of other organisations that are of interest to you.



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