You use this program to view the results of applying the Du Pont analysis on your General Ledger values.
| Field | Description |
|---|---|
| Compare | |
| Ledgers | Select this to perform the analysis on all the actual ledgers and the budgets currently available in your SYSPRO company. |
| Periods | Select this to perform the analysis for a specific
ledger/budget year. You indicate this ledger/budget year using the Financial year option. |
| Financial year | Select the specific year's actual ledger or budget you
want to query. The number of years for which the actual ledgers are available for inclusion in the query depends on the number of years for which you are retaining your General Ledger history (General Ledger Setup). The number of budget ledgers available for inclusion in the query depends on the number of budgets defined (General Ledger Codes). |
| Go arrow | Select this icon to view the results of the query for all the ledgers or for the period you selected. |
This treeview displays the hierarchy of the Du Pont analysis for all ledgers or for a specific period depending on your selection at the Compare field.
You can also use the GL Ratio Analysis Query program to view the General Ledger accounts included in the calculations of the various financial ratios.
| Field | Description | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Hierarchy | You use the entries in this treeview to select the
calculation you want to perform. The results are displayed in the Graph and Details panes. The formulas for each calculation are listed below together with comments where applicable. |
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| Return on Equity |
ROE = (Net profit / Sales) * (Sales / Assets)
* (Assets / Equity)
= (Profit margin) * (Asset turnover) * (Equity multiplier) Equity multiplier = Leverage Factor = Total Assets / Shareholder's Equity. The higher the number, the more debt the company has. |
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| Return on Assets | Return on Assets = [Profit] / [Total Assets] *
100 OR [Net Profit Margin] * [Total Asset Turnover] expressed as x % The General Ledger module is required for this calculation. |
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| Net Profit Margin |
Net Profit Margin = [Net Income /
Sales]
It is an indicator of a company's pricing policies and its ability to control costs. How much profit is made for every unit of currency the company generates in revenue. The Net Profit Margin is also known as the Net Profit Ratio, Profit Margin or Net Margin.
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| Total Asset Turnover |
Asset Turnover = Sales / Total
Assets
The amount of sales generated for every unit of currency's worth of assets. This measures the firm's efficiency at using assets. The higher the number the better. |
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| Net Sales | The sum of the Movements of the Sales Accounts less the
sum of the Sales Returns Accounts less the sum of the Trade
Discounts Accounts as defined in AR Sales Ledger Interface. This is only available when the Sales Order module is installed. |
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| Total Assets | Sum of Current Assets and Non-current Assets. The sum of the Closing Balances of all GL Accounts defined as Current Asset and Non-current Asset Accounts in General Ledger Codes or GL Structure Definition.
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| Financial Leverage Multiplier |
Leverage Factor = Total Assets / Shareholder's
Equity
The higher the number, the more debt the firm has. |
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| Total Assets | Sum of Current Assets and Non-current Assets. The sum of the Closing Balances of all GL Accounts defined as Current Asset and Non-current Asset Accounts in General Ledger Codes or GL Structure Definition.
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| Capital | The sum of the Closing Balances of all GL Accounts defined as Capital Accounts in General Ledger Codes or GL Structure Definition. |
This pane contains the graph of the hierarchy you selected from the treeview in the Ledger/Periods pane.
| Column | Description |
|---|---|
| Periods | This indicates the period within the ledger for which the analysis values are displayed. |
| Ledgers | This indicates the ledger for which the analysis values are displayed. |
| Value | This indicates the result of the selected calculation for the ledger/period selected. |
The Du Pont analysis measures the combined effects of profit margins and asset turnover. It enables the analyst to understand from where superior (or inferior) return is derived by comparison with companies in similar industries (or between industries).
One of the easiest ways to gauge whether a company is an asset creator or a cash consumer is to look at the return on equity (ROE). Businesses that generate high returns on equity are businesses that create substantial assets for each unit of currency invested.
The Du Pont Analysis is a means of analyzing the three components of return on equity:
Operating efficiency - measured by the Net Profit Margin
Asset use efficiency - measured by Total Asset Turnover
Financial leverage - measured by the Financial Leverage Multiplier.
The following illustrates how Return on Equity is mathematically broken down:
Return on Equity = [Profit] / [Capital]
= [Profit / Total Assets] * [Total Assets / Capital]
= Return on Assets * Leverage
= [Profit / Total Assets] * Leverage
= [Profit / Net Sales] * [Net Sales / Total Assets] * Leverage
= Net Profit Margin * Total Asset Turnover * Leverage
ROE = [Net profit / Sales] * [Sales / Assets] * [Assets / Equity] = [Profit margin] * [Asset turnover] * [Equity multiplier]
With this method, assets are measured at their gross book value rather than at net book value in order to produce a higher ROI (Return on Investment). It is believed that measuring assets at gross book value removes the incentive to avoid investing in new assets. New asset investment avoidance can occur as financial accounting depreciation methods artificially produce lower ROIs in the initial years an asset is placed into service.