From the course: Finance for Non-Financial Managers (2015)
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The DuPont framework: Ford and General Motors
From the course: Finance for Non-Financial Managers (2015)
The DuPont framework: Ford and General Motors
- Okay, we looked at Uncertain and Benchmark, now let's look at a real company, let's look at Ford, and we're going to compare Ford and General Motors. In 2014 Ford's return on equity was 12.9%. Again, that's in the good range. But now let's compare their 2014 performance to their 2013 performance. We see in 2013 their return on equity was 27.6%. Now what's the obvious question? Why? Why did it drop from 27.6% down to 12.9%? Well we can answer that question again by using the DuPont framework. As you can see here we have the DuPont framework for 2014 and 2013. We've got Ford's performance broken down by profitability, efficiency, and leverage. Let's just take a look at these comparisons and see what we can conclude. First of all let's look at leverage. In 2013 their leverage was seven point seven. In other words they had seven point seven dollars in assets for every dollar's worth of equity. In 2014 that had…
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