Microsoft Dupont Analysis of Microsoft Dupont Analysis Essay

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Microsoft DuPont

DuPont Analysis of Microsoft

DuPont Analysis Overview

The DuPont Analysis is a type of analysis that provides a more detailed look at a company's Return on Equity (ROE) by breaking it into three main components. The three components are profit margin, asset turnover and a leverage factor. By separating the ROE into these smaller categories, investors can quickly identify how effectively or efficiently a company is using their resources. If any of the three categories is performing poorly then this can lower the overall figure. To calculate a firm's ROE through Du Pont analysis, multiply the profit margin (net income divided by sales), asset turnover (sales divided by assets) and leverage factor (total assets divided by shareholders' equity) together - the higher the result, the higher the return on equity.

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Microsoft's Profit Margin

Profit Margin = net income / total revenues

Income Statement

Revenue (ttm): 72.93B

Net Income: 15.46B

Profit Margin

15.46 / 72.93 = 22%

Microsoft's Asset Turnover

Asset turnover = revenue / assets

Revenue (ttm): 72.93B

Assets: 343.30B

Asset turnover = 72.93 / 556.71 = 13.1%

Microsoft's Financial Leverage

Financial Leverage = Assets / Equity

Assets: 68.10B

Equity: 72.58B

Financial Leverage = .94

Summary

Profit Margin = 22%

Asset turnover = 22.7

Financial Leverage = .94

Microsoft is in an industry that makes it more difficult to apply DuPont analysis averages to determine its financial health. Microsoft obviously operates much differently than many brick and motor business such as retail establishments. However, when compared to companies in similar industries then this can help identify different aspects.....

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