[Verse 1]
When you want to see how well a company can grow
There's a magic number that will help you know
Return on equity tells the story clear
But DuPont breaks it down so you can hear
Three little pieces make the bigger whole
Each one plays its own important role
[Chorus]
Profit margin times asset turnover
Times equity multiplier takes you over
P-A-E remember these three
They unlock ROE's mystery
Profit margin times asset turnover
Times equity multiplier shows you how they're doing overall
[Verse 2]
First component is the profit margin game
How much profit from each dollar of sales they claim
Net income divided by revenue
Shows efficiency in what they do
Higher margins mean they keep more cash
From every sale without a dash
[Chorus]
Profit margin times asset turnover
Times equity multiplier takes you over
P-A-E remember these three
They unlock ROE's mystery
Profit margin times asset turnover
Times equity multiplier shows you how they're doing overall
[Verse 3]
Asset turnover is component number two
Revenue over assets shows what they can do
How efficiently they use what they own
To generate sales and profits grown
Higher turnover means they're working smart
With every asset playing its part
[Bridge]
Equity multiplier rounds out our song
Assets over equity keeps us strong
Shows how much leverage they employ
Financial risk they might enjoy
Higher numbers mean more debt
But also returns they might get
[Chorus]
Profit margin times asset turnover
Times equity multiplier takes you over
P-A-E remember these three
They unlock ROE's mystery
Profit margin times asset turnover
Times equity multiplier shows you how they're doing overall
[Outro]
DuPont analysis breaks it down
From confusion to clarity found
Three components tell the tale
Of how companies succeed or fail
ROE equals P-A-E
Now you've got the master key