DU PONT Ratio: A comprehensive measure of business performance

Panayiotis Courtis
European Research Studies Journal, Volume VI, Issue 1-2, 21-34, 2003
EOI: 10.11214/thalassinos.06.01.002

Abstract:

In this paper we present and compare various financial measures of business performance which are becoming progressively more comprehensive culminated with the HOB model which is the expanded form of DU PONT ratio. We allege that DU PONT - ROE model can be used as a measure of strategy success. We also consider it is a superior indicator in the long run. It mergers all necessary and meaningful information of financial statements reflecting supply and demand factors which are largely determined by industry and firm specific factors. Further decomposition of ROE according to HOB model make more clear the internal and external environment assessment and explains more fully the value creation process contributing considerably to strategic management process.


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