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Implementation of Du Pont Model in Non-Financial Corporations

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  • Sylvia Jencova
  • Eva Litavcova
  • Petra Vasanicova

Abstract

In this paper, the practical application of the dynamic decomposition of the return on equity is used on the basis of the ratio indicators. These indicators are determined according to the absolute items taken from the Register of Financial Statements of the Slovak Republic and are obtained for individual non-financial corporations according to SK NACE 26 and SK NACE 27 for the period 2013- 2016. Du Pont decomposition of the return on equity allowed quantifying the impact of the financial indicators such as return on sales, total assets turnover ratio, financial leverage, and interest and tax profit reduction, which were linked by a multiplicative product interaction. Quantification of the factors impact was applied to a sample of 138 non-financial corporations using the equations valid for the application of the functional method. By applying the exploration data analysis, the impact of the factors is plotted graphically. The box plot shows that the obtained values are very varied and it follows that no clear conclusion can be deduced. There is potential for further exploration of the dynamic model.

Suggested Citation

  • Sylvia Jencova & Eva Litavcova & Petra Vasanicova, 2018. "Implementation of Du Pont Model in Non-Financial Corporations," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 14(2), pages 131-141.
    • Handle: RePEc:mje:mjejnl:v:14:y:2018:i:2:p:131-141
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    References listed on IDEAS

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    1. Y. A. Babalola & F. R. Abiola, 2013. "Financial Ratio Analysis of Firms: A Tool for Decision Making," International Journal of Management Sciences, Research Academy of Social Sciences, vol. 1(4), pages 132-137.
    2. Robert Stefko & Beata Gavurova & Samuel Korony, 2016. "Efficiency Measurement In Healthcare Work Management Using Malmquist Indices," Polish Journal of Management Studies, Czestochowa Technical University, Department of Management, vol. 13(1), pages 168-180, June.
    3. Petr Marek, 2009. "Not very Known Author of Du Pont Model - Frank Donaldson Brown (1885 - 1965) [Nepříliš známý tvůrce Du Pont modelu - Frank Donaldson Brown (1885 - 1965)]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2009(2), pages 70-75.
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    1. Dariusz Kusz & Iwona Bąk & Beata Szczecińska & Ludwik Wicki & Bożena Kusz, 2022. "Determinants of Return-on-Equity (ROE) of Biogas Plants Operating in Poland," Energies, MDPI, vol. 16(1), pages 1-22, December.
    2. Zdeněk Zmeškal & Dana Dluhošová & Karolina Lisztwanová & Antonín Pončík & Iveta Ratmanová, 2023. "Distribution Prediction of Decomposed Relative EVA Measure with Levy-Driven Mean-Reversion Processes: The Case of an Automotive Sector of a Small Open Economy," Forecasting, MDPI, vol. 5(2), pages 1-19, May.
    3. Dana Dluhosova & Karolina Lisztwanova & Antonín Poncik & Iveta Ratmanová & Zdenek Zmeskal, 2022. "Dynamic and Static Decomposition Analysis of the Czech Automotive Production Sector," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 84-95.

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