MODELS AND ILLUSTRATIONS
Developed as a tool for analyzing methods of increasing return on assets (ROA). At the heart of the analysis are two financial measures: operating profit margin (OPM) and asset turnover ratio (ATR). The OPM measures a business’ pre‐tax returns relative to its level of sales, while the ATR measures the efficiency of the business’ asset base. Multiplying OPM times ATR equals the business’ ROA. Over time the Du Pont model has been expanded to include the leverage of an operation and thereby allowing for computation and analysis of return on equity (ROE).