From the course: Running a Profitable Business: Understanding Financial Ratios
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DuPont framework: Target and Walmart
From the course: Running a Profitable Business: Understanding Financial Ratios
DuPont framework: Target and Walmart
- Okay, we looked at uncertain and benchmark. Now, let's look at a real company. Let's look at Target, and we're going to compare Target to Walmart. In 2013, Target's return on equity was 12.1%. Again, that was in the good range. But now, let's compare them, their 2013 performance to their 2012 performance. We see in 2012, their return on equity was 18.1%. Now, what's the obvious question? Why? Why did it drop from 18.1% down to 12.1%? Well, we can answer that question, again, by using the DuPont framework. As you can see here, we have the DuPont framework for 2013 and 2012. We've got Target's performance broken down by profitability, efficiency, and leverage. Let's just take a look at these comparisons and see what we can conclude. First of all, let's look at leverage. In 2012, their leverage was 2.9. In other words, they had 2.9 dollars in assets for every dollar's worth of equity. In 2013, that had dropped down…
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