What are the components of the DuPont model and how are they calculated?

Asset turnover ratio, financial leverage, and net profit margin are the main aspects of the DuPont model. With these, a company’s return on equity (ROE) is evaluated. 

Net Profit Margin is calculated with the following steps:

•  Profit Margin = Net Income /Revenue

The formula for calculating the Asset Turnover Ratio is:

• Asset Turnover Ratio = Net Sales (or Revenue) / Average Assets

Financial Leverage is calculated by:

• Financial leverage = Average Assets / Average Equity