![]() ![]() We now have all the required inputs to calculate ROE using both the 3-step and 5-step DuPont approaches. Since there is no debt in the capital structure in the “Downside” case, the total assets must equal the average shareholders’ equity for the balance sheet to remain in balance. Next, we’ll move on to the balance sheet assumptions, for which we only require two data points, the “Average Total Assets” and “Average Shareholders’ Equity” accounts.ī/S Base and Upside Case (Step Function): the value of the hard-coded number in blue font is added to the cell on the left.īase and Upside Case (I/S Step Function): Then, from those figures, we’ll use the following step functions – i.e. We’ll also use a step function and use different step values for the other two cases. Here, we’ll be assessing three different operating scenarios:įor our projections, we’ll use the “Downside” case as our starting point. Suppose we’re tasked with calculating a company’s return on equity (ROE) using the DuPont analysis framework. Operating Scenarios and Balance Sheet Assumptions
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