A Study of Financial Performance Using DuPont Analysis in a Supply Chain

Abstract

This study attempts to assess the financial performance of a supply chain company. In order to achieve the objective, this study has analysed the financial ratios applying the DuPont analysis, which has been demonstrated with tables to show the company's performance trend for five years (2018-2022). DuPont analysis is based on the analysis of Return on Equity (ROE) and Return on Assets (ROA). The ROE disaggregates performance into three components:
• Net Profit Margin,
• Total Asset Turnover, and
• The Equity Multiplier
The return on investment consists of Assets Turnover (Operating Income × Total Assets) and Net Profit Margin (EBIT × Operating Income). From the study, it is found that:
• The company under study is more efficient in managing assets to generate profits than the use of equity to generate profits.
• The company is, on average, a low-risk firm for investors and shareholders.
• ROE and ROA are the most comprehensive measure of the profitability of a firm as well as a compass for making operating, investing, financing, and leverage-related decisions.
Based on these findings, it is recommended that:
Management of the company needs to do an operational overhaul to sustain the significant areas of strength and overcome the weakness evident in the financial statements.