Du point analysis

The Du point system of analysis is named for the Du point Corporation, which originally popularized its use. It is used by financial managers to dissect the firms financial statements and to assess its financial condition.Du point system merges the income statement and balance sheet into two summary measures profitability, return on total assets and return on equity.

The Du point system links the net profit margin with its total assets turn over.The Du point formula then multiplied these two ratios to find the firms return on assets(ROA):

ROA=NET PROFIT MARGIN* TOTAL ASSETS TURNOVER

Substituting the approriate formulas into the equation and simplifying produce for formula given earlier:
ROA=NET INCOME/SALES*SALES/TOTAL ASSETS

The Du point formula allows the firm to brisk down its return on total assets into profit on sales and an efficiency of assets use component.Typically, a firm which low net profit margin has total assets.