Learn how to evaluate and compare the ratios of two companies.
- The DuPont framework is named … after a system of ratio analysis … developed over 100 years ago at DuPont … by F. Donaldson Brown. … This framework provides a systematic approach … to identifying general factors … causing ROE to deviate from normal. … The DuPont system also provides a framework … for computation of financial ratios … to yield a more in-depth analysis … of a company's areas of strengths and weaknesses. … Now the insight behind the DuPont framework … is that ROE can be broken out into three components; … profitability, efficiency and leverage. … For each of the three ROE components, … profitability, efficiency and leverage, … there is one ratio that summarizes … a company's performance in that area. … These ratios are as follows. … First, return on sales, … a measure of a company's profitability … is computed as net income divided by sales … and is interpreted as the number of pennies in profit … generated from each dollar of sales. … Asset turnover, a measure of a company's efficiency, …
Jim Stice
Kay Stice
Released
3/5/2019- Determine the parts of an income statement.
- Review the different parts of a statement of cash flows.
- Analyze common-size financial statements.
- Define ratio analysis.
- Explain current ratio.
- Distinguish the steps in the operating cycle.
- Examine how to determine the day’s sales in inventory.
- Explore how to calculate the average collection period.
- Identify the fundamentals of analyzing cash flows.
- Explore business valuation while examining the intersection of accounting and finance.
Skill Level Beginner
Duration
Views
-
Introduction
-
1. Quick Review of Financial Statements
-
Review of the balance sheet4m 49s
-
2. Analyzing Financial Statements
-
3. Ratio Analysis: DuPont Framework
-
Ratio analysis3m 27s
-
Return on equity2m 26s
-
DuPont framework4m 52s
-
Current ratio4m 12s
-
Debt ratio4m 10s
-
Price-earnings ratio3m 39s
-
4. Ratio Analysis: The Operating Cycle
-
The operating cycle3m 46s
-
Days sales in inventory3m 49s
-
Average collection period3m 31s
-
Days purchases in payable3m 28s
-
Real world: Procter & Gamble3m 21s
-
5. The Statement of Cash Flows
-
Analyzing cash flows2m 22s
-
What does it tells us?4m 21s
-
Cash flow patterns2m 32s
-
One method of analysis4m 37s
-
Two methods for presentation4m 14s
-
6. Forecasting Financial Statements
-
The initial assumptions1m 48s
-
Forecasted retained earnings2m 25s
-
Forecasted assets2m 42s
-
7. Intro to Business Valuation
-
8. Valuation: Using Multiples
-
The Microsoft IPO3m 46s
-
Earnings multiples3m 32s
-
Equity multiples3m 38s
-
Sales multiples4m 23s
-
-
9. Valuation: Free Cash Flows
-
Buying the Hong Kong car?2m 26s
-
Risk and interest rates3m 44s
-
Forecasting cash flows4m 22s
-
-
10. Valuation: Comparing Models
-
Brief McDonald's history2m 53s
-
McDonald's: The numbers2m 41s
-
-
Conclusion
-
Next steps3m 4s
-
Take notes with your new membership!
Type in the entry box, then click Enter to save your note.
Press on any video thumbnail to jump immediately to the timecode shown.
Notes are saved with you account but can also be exported as plain text, MS Word, PDF, Google Doc, or Evernote.
Share this video
Embed this video
Video: DuPont framework