are used. It measures the combined effects of profit margins and asset turnover. The return on equity (ROE) ratio is a measure of the rate of return to stockholders. Decomposing the ROE into various factors influencing company performance is often called the DuPont system. Where Net Income = net income after taxes Equity = shareholders' equity EBIT = Earnings before interest and taxes Pretax Income is often reported as Earnings Before Taxes or EBT This decomposition presents various ratios used in fundamental analysis. The company's tax burden is (Net income ÷ Pretax profit). This is the proportion of the company's profits retained after paying income taxes. [NI/EBT] The company's interest burden is (Pretax income ÷ EBIT). This will be 1.00 for a firm with no debt or financial leverage. [EBT/EBIT] The company's operating income margin or return on sales (ROS) is (EBIT ÷ Revenue). This is the operating income per dollar of sales. [EBIT/Revenue] The company's asset turnover (ATO) is (Revenue ÷ Average Total Assets). The company's equity multiplier is (Average Total Assets ÷ Average Total Equity). This is a measure of financial leverage. References External links Free Video Tutorial on DuPont Analysis Decoding DuPont Analysis DuPont analysis Financial ratios DuPont