Things to note of doing DuPont Analysis in Independent Study assignment

Things to note of doing DuPont Analysis in Independent Study assignment


I notice that some students are interested in doing DuPont Analysis in their Independent Study assignments [also refer to the video]; this is acceptable but there are two things to bear in mind:

1. DuPont Analysis is a ratio analysis; you do not apply multiple regression analysis on these ratios involved to show that the ratios involved have correlations. Just like you do not do multiple regression analysis to demonstrate that 2 x 2 is 4. The relations between the ratios involved are mathematically clear. Nevertheless, it could be useful to adopt some of the DuPont ratios in a multiple regression formula and, subsequently, to use the DuPont analysis concept to interpret multiple regression formula findings as long as the exercise is not merely to "prove" the mathematical relations between the various DuPont ratios. [The choices of variables to use in the construction of a multiple regression formula have to be informed by literature review].
2. When students apply DuPont Analysis to their data collected, they will notice that it is not easy to  find out and standardize the ratio figures involved directly from companies' annual reports. An easier way is to adopt these companies' financial ratios from Financial Portals direct.
3. DuPont Analysis is a financial/ management accounting technique; it could not make up the main data analysis exercise in your Independent Study reports. It can only be considered as a complementary (optional) data analysis for the Independent Study reports.

In the past, I also taught DuPont Analysis in the subject of Advanced Management Accounting; it is very often taught in the Diploma on Accounting course.