How to correctly evaluate DuPont analysis?

The most remarkable feature of DuPont model is that it organically combines several ratios used to evaluate the operating efficiency and financial status of enterprises according to their internal relations, forming a complete index system, which is finally reflected comprehensively through the return on net assets.

Disadvantages:

1. Paying too much attention to short-term financial results may encourage the short-term behavior of the company's management and ignore the long-term value creation of the company.

2. Financial indicators reflect the past business performance of enterprises and measure whether enterprises in the industrial age can meet the requirements. However, in the information age, customers, suppliers, employees, technological innovation and other factors have more and more influence on the business performance of enterprises, and DuPont analysis is powerless in these aspects.

3. In the market environment, the intangible knowledge assets of enterprises are very important to improve the long-term competitiveness of enterprises, but DuPont analysis method can not solve the valuation problem of intangible assets.

Extended data:

19 12, Frank Donaldson Brown, a salesman of DuPont, wrote a report to explain the company's operational efficiency to the management. The report said that "it is necessary to analyze the profit rate earned with the company's own money", and he dismantled this ratio.

This method is widely used in DuPont's financial analysis after 1920. When it was carried forward, the world named it DuPont analysis.

Baidu encyclopedia-DuPont analysis method