§ 01
AAPL — ROE, Net Margin. Open AAPL on the Ledge to see current values.
§ 02
ROE = Net Margin x Asset Turnover x Equity Multiplier
§ 03
| ROE Driver | High Margin, Low Turnover | Low Margin, High Turnover |
|---|---|---|
| Example | Luxury goods (Hermes) | Retail (Walmart) |
| Net Margin | 25% | 2.5% |
| Asset Turnover | 0.7x | 2.5x |
| Result | High ROE from profitability | Similar ROE from efficiency |
§ 04
Check the **DuPont breakdown** for any company in the Financials section. Is the ROE driven by margins, efficiency, or leverage?
§ 05
§ 06
DuPont decomposition: ROE = Net Margin × Asset Turnover × Equity Multiplier. Company X has 25% ROE: 10% margin × 1.5 turnover × 1.67 leverage. What's the risk story?
Five questions · AI feedback
Sit with the ideas.
A firm has Net Income of $100,000, Revenue of $1,000,000, Total Assets of $500,000, and Equity of $200,000. What is ROE using the DuPont model, and what is the biggest driver?
Why: