The purpose of this paper is to advance the interpretation of the Du Pont Equation, which is commonly used in the financial statements analysis of corporations. The paper makes a special interpretation of the three te...The purpose of this paper is to advance the interpretation of the Du Pont Equation, which is commonly used in the financial statements analysis of corporations. The paper makes a special interpretation of the three terms which appear in the Du Pont Equation that provides an understanding of the overall financial standing of the corporation under consideration. As a result of this interpretation, the order in which f＇mancial statements analysis is commonly performed should be reversed. That is, in financial statements analysis, one should start with the analysis of the Du Pont Equation, to gain an overall understanding of the financial situation of the corporation; and then, perform the ratio analysis, to gain a detailed understanding of the financial situation of the corporation. This order of analysis is in contrast to the order in which financial statements analysis is commonly performed, i.e., first, the ratio analysis is performed, and then, the Du Pont Equation is analyzed.展开更多
文摘The purpose of this paper is to advance the interpretation of the Du Pont Equation, which is commonly used in the financial statements analysis of corporations. The paper makes a special interpretation of the three terms which appear in the Du Pont Equation that provides an understanding of the overall financial standing of the corporation under consideration. As a result of this interpretation, the order in which f＇mancial statements analysis is commonly performed should be reversed. That is, in financial statements analysis, one should start with the analysis of the Du Pont Equation, to gain an overall understanding of the financial situation of the corporation; and then, perform the ratio analysis, to gain a detailed understanding of the financial situation of the corporation. This order of analysis is in contrast to the order in which financial statements analysis is commonly performed, i.e., first, the ratio analysis is performed, and then, the Du Pont Equation is analyzed.
