Three key ratios - Profit Margin, Asset Turnover, Financial Leverage - when multiplied together give the overall Return on Equity of any enterprise.
This simple but powerful tool provides an important and penetrating insight into the financial performance of any business.
It reveals how much profit a company earned in comparison to the total amount of shareholder equity invested.
It's a key tool for business leaders when setting strategy and a key tool for investors when evaluating investments. The approach was originally developed by DuPont to evaluate its own investment projects, but later became widely used as a general tool for business leaders and investors.