Financial Analysis Newbie Guide

I have been learning the art of analyzing financial statement for almost four years now and finally come up with an easy trick. For a starter, let's check on this Du Pont Ratio on Return on Investment (ROI).




The ratio consists of three main part, which are the operational indicator, investment indicator, and leverage indicator respectively. The operational indicator highlights the effectiveness of company's sales strategy. The investment indicator focuses on the company's asset productivity and the last one emphasizes its debt advantages to leverage the performance.

After we calculate the three indicators, we can compare it horizontally among the industry's performance and market leader's indicators. The significant differences will be our signal for thorough measurement in the accordance ratio.

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