Profit Maximization using Dupont/EDGAR

P o i Maximiza ion
using
Dupon /EDGAR
Concep
Using a Combina ion o Finance
(Dupon Analysis) and echnology
(US. Secu i ies and exchange
commission / EDGAR), an
en ep eneu may boos he Re u n
on Equi y o a company h ough
benchma king bes p ac ices o
in e na ional success s o ies,
u ning numbe s in o p ac ical
ac ions.
The Au ho
S ep by S ep
1- Choose a P ope
Benchma k o You
company
2- D aw he
Financial da a o he
Benchma k
Company Th ough
Sec (US. Secu i y
Exchange
commission –
EDGAR Websi e)
3- Fill he
Dupon
Equa ion
4- Compa e he
Ra ios Be ween
you company
and he
benchma k
5- Implemen
s a egies and
Tac ics o
inc ease e u n
Choose a P ope
Benchma k o You
company
S ep 1

A Benchma k
•A benchma k company (also
known as a pee company o
compa able i m) is ano he i m
(Some imes he bes in Class)
used as a e e ence poin o
compa e you company o
ano he success ul company.
Key Selec ion
C i e ia o a
Benchma k
Indus y and Business
Model
The mos c ucial s ep is
o selec a company
ope a ing in he same
indus y and wi h a
simila business model.
Example: I you a e analysing
Fo d Mo o Company,
p ope benchma ks include
Toyo a bu no Tesla (since
Tesla ocuses on Elec ic
ca s).
P oduc Mix and
Ta ge Ma ke
Benchma k companies mus
se e a simila cus ome
segmen and o e
compa able p oduc lines.
Fo ins ance:
Apple may benchma k agains
Samsung (bo h consume
elec onics gian s)
Choose 10-k o Yea ly Repo s
(10-Q o Qua e ly)

Choose he Mos Recen Yea
Wha we Need o
Collec
1- Re enue (Sales) om he income
S a emen
2- Ne Income om he income
S a emen
3- Asse s om he balance shee
4- Equi y om he balance shee

Tes You sel
The Elemen s we need o Collec om
EDGAR Sec websi e a e:
A- Asse s, Liabili ies, Equi y and Ne Income
B- Liabili ies, Asse s, Sales and Ne Income
C- Asse s, Equi y, Sales and Ne Income
E- Asse s, Equi y, Sales and G oss P o i
Tes You sel
The Elemen s we need o Collec om
EDGAR Sec websi e a e:
A- Asse s, Liabili ies, Equi y and Ne Income
B- Liabili ies, Asse s, Sales and Ne Income
C- Asse s, Equi y, Sales and Ne Income
E- Asse s, Equi y, Sales and G oss P o i
S ep 3
DUPONT Equa ion
3- Qni y Pa o Dupon o
Elec onics

ROE The objec i e o he Re u n on
Equi y Equa ion is o measu e
how much e u n a company
can gene a e om one dolla
o equi y.
𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦
𝑅𝑒𝑡𝑢𝑟𝑛 (𝑁𝐼)
𝐸𝑞𝑢𝑖𝑡𝑦
The Dupon Equa ion
The DuPon equa ion aims o
decompose e u n on equi y
(ROE) o show how e icien ly a
company con e s equi y in o
p o i h ough p o i abili y,
e iciency, and le e age.
𝑅𝑂𝐸 = 𝑁𝐼
𝑆𝑎𝑙𝑒𝑠 ×𝑆𝑎𝑙𝑒𝑠
𝐴𝑠𝑠𝑒𝑡𝑠 ×𝐴𝑠𝑠𝑒𝑡𝑠
𝐸𝑞𝑢𝑖𝑡𝑦
𝑅𝑂𝐸 = 𝑁𝐼
𝑆𝑎𝑙𝑒𝑠 ×𝑆𝑎𝑙𝑒𝑠
𝐴𝑠𝑠𝑒𝑡𝑠 ×𝐴𝑠𝑠𝑒𝑡𝑠
𝐸𝑞𝑢𝑖𝑡𝑦
𝑅𝑂𝐸 = 20,157
680,985 ×680,985
260,823 ×260,823
97,421
𝑅𝑂𝐸 = 0.0296 × 2.6109 × 2.6773
𝑊𝑎𝑙𝑚𝑎𝑟𝑡 𝑅𝑂𝐸 = 0.2069
Tes You sel
All else equal, which o he Below has he mos posi i e impac on ROE
A- Sales inc ease
B- Asse Inc ease
C- Cos o Goods Sold dec ease
E- Liabili y dec ease
Tes You sel
All else equal, which o he Below has he mos posi i e impac on ROE
A- Sales inc ease
B- Asse Inc ease
C- Cos o Goods Sold dec ease
E- Liabili y dec ease

Pa 4
Compa ison
𝑅𝑂𝐸 = 𝑁𝐼
𝑆𝑎𝑙𝑒𝑠 ×𝑆𝑎𝑙𝑒𝑠
𝐴𝑠𝑠𝑒𝑡𝑠 ×𝐴𝑠𝑠𝑒𝑡𝑠
𝐸𝑞𝑢𝑖𝑡𝑦
𝐵𝑒𝑛𝑐ℎ𝑚𝑎𝑟𝑘 𝑅𝑂𝐸 = 0.0296 × 2.6109 × 2.6773
𝑌𝑜𝑢𝑟 𝐶𝑜𝑚𝑝𝑎𝑛𝑦 𝑅𝑂𝐸 = 0.0153 × 2.8179 × 1.2513
In his Pa , you ill bo h you company’s da a using you inancial s a emen s and he
benchma k’s da a ex ac ed om EDGAR o Compa e
•You company should Focus on p o i abili y (0.0153 Ve sus 0.0296)
and le e age (1.2513 Ve sus 2.6773) o inc ease Re u n
•In Fac , Gi ing he high E iciency (Abili y o gene a e sales om Asse s,
You company should conside aking a loan immedia ely (i he e is an
expansion oppo uni y) o signi ican ly inc ease he Re u n o Sha eholde s
(In ac , Quad upling he p o i s o he owne )
𝐵𝑒𝑛𝑐ℎ𝑚𝑎𝑟𝑘 𝑅𝑂𝐸 = 0.0296 × 2.6109 × 2.6773
𝑌𝑜𝑢𝑟 𝐶𝑜𝑚𝑝𝑎𝑛𝑦 𝑅𝑂𝐸 = 0.0153 × 2.8179 × 1.2513
𝑌𝑜𝑢𝑟 𝐶𝑜𝑚𝑝𝑎𝑛𝑦 𝑅𝑂𝐸
= 0.0153 × 2.8179
× 1.2513
Using Dupon Analysis, you no ice ha you
le e age Asse s/Equi y is 1.2513
•This means ha you ha e a Capi al based on
80% Equi y and 20% Deb
Because i Asse s = 500, Equi y would be 400
and 500/400 = 1.25
And i Equi y is 400 (80% o 500) , Liabili y would
be Asse – Equi y = 100 (20% o 500).
•By swi ching you Capi al s uc u e o 80%
Deb h ough aking addi ional deb and 20%
Equi y, you Dupon ’s le e age a io (i Asse s a e
E icien ly in es ed) would become 5 ins ead o
1.25, he Company’s owne s would ealize 400%
Ne P o i s (ins ead o winning 10$ pe 100$
in es ed oday, he sha eholde s would win in
eali y 40$)
S a egy 2 Ne Income
G ow h – Sho Te m
Reduce Cos o Goods
Sold (COGS)

How o Reduce Cos o Goods Sold (COGS)
Supplie Nego ia ions: Renego ia e con ac s o consolida e supplie s o be e bulk discoun s.
Lean Manu ac u ing: Minimize was e, op imize p oduc ion p ocesses, and implemen jus -in-
ime (JIT) in en o y sys ems.
Ou sou cing & Au oma ion: Au oma e epe i i e asks o ou sou ce non-co e unc ions a lowe
cos s.
Economies o Scale: As p oduc ion inc eases, ixed cos s a e sp ead o e mo e uni s, imp o ing
ma gins
S a egy 3 Ne
Income G ow h –
Sho Te m
Imp o e Ope a ing
E iciency
How o Imp o e Ope a ing E iciency
Digi al T ans o ma ion: Use AI, ERP, o analy ics ools o imp o e p oduc i i y
and decision-making.
Reduce O e heads: Op imize ene gy use, o ice space, logis ics, and
adminis a i e expenses.
Op imize Labo Cos s: Shi om ime-based o pe o mance-based
compensa ion o use lexible wo k o ce s uc u es.
Cen alize Ope a ions: Reduce edundan unc ions (e.g., sha ed se ice
cen e s o HR, inance, IT).
S a egy 4 Ne Income G ow h
– Sho Te m
Op imize Financial S uc u e
•Deb Re inancing: Lowe in e es
expenses by nego ia ing be e c edi
e ms o e inancing high-in e es
deb .
•Tax Op imiza ion: U ilize a ailable
c edi s, deduc ions, o egional
incen i es e hically o educe ax
bu dens.
•Hedging Cu ency & In e es Risks:
P o ec p o i ma gins om
mac oeconomic ola ili y.
Op imize
Financial
S uc u e

S a egy 5 Ne Income
G ow h – Sho Te m
Enhance P oduc Mix and
Cus ome Re en ion
•Focus on High-Ma gin P oduc s: Shi
sales ocus owa d segmen s o SKUs ha
yield highe ma gins.
•Cus ome Re en ion P og ams: Loyal
cus ome s cos less o e ain han new
cus ome s o acqui e.
•Reduce Re u n Ra es: Quali y con ol
and cus ome educa ion lowe a e -sale
cos s.
Enhance
P oduc Mix
and
Cus ome
Re en ion
S a egy 6 Ne
Income G ow h
– Long Te m
S a egic Long-Te m Ini ia i es
•Sus ainabili y and ESG In eg a ion: Ene gy-e icien and sus ainable ope a ions
educe long- e m cos s and a ac in es o s.
•R&D In es men : Inno a i e p oduc s main ain ma ke leade ship and p icing
powe .
•Da a Analy ics: P edic i e analy ics help o ecas demand, op imize p icing, and
minimize unsold in en o y.
S a egic Long-Te m
Ini ia i es
S a egy 3 E iciency
G ow h – Medium e m
Enhance Asse P oduc i i y

Technology U iliza ion
•Implemen ERP and CRM sys ems o ack
asse pe o mance.
•Use IoT and AI o p edic i e main enance —
educe down ime and boos p oduc i e
capaci y.
Ope a ional E iciency
•Sha e unde u ilized asse s ac oss di isions o
p ojec s.
•Inc ease asse u iliza ion a es (e.g., machine y
unning ime, occupancy a es).
Op imize Capi al Expendi u es
•P io i ize in es men s wi h highe ROI and
quicke payback.
•A oid o e -in es men in low-yield o
specula i e ixed asse s.
Enhance
Asse
P oduc i i y
Le e age
𝐴𝑠𝑠𝑒𝑡𝑠
𝐸𝑞𝑢𝑖𝑡𝑦
Le e age, exp essed h ough he Asse -
o-Equi y (A/E) a io, measu es how
e ec i ely a company ampli ies
sha eholde e u ns by using bo owed
unds o inance i s asse s.
S a egy 1
Le e age
G ow h
–
Medium e m
Inc ease he Ra io by Inc easing
Le e age (Deb Financing)
Inc ease he Ra io by Inc easing Le e age (Deb Financing)
Inc ease
Issue New Deb Ins ead o New Equi y
Issue
Moni o he e iciency a io, he highe i is he mo e deb you
can ake o addi ional in es men s
Moni o

S a egy 2 Le e age G ow h – Medium
e m
•Use Financial Le e age S a egically
Use Financial Le e age S a egically
•Use le e age in low-in e es
en i onmen s (JAPAN cu en ly 0.5%).
(No e his is no Typo: No 5%, i is 0.5%)
•Cau ion: Excessi e le e age e en a
low in e es can inc ease inancial
isk, P o i able bu isky so balance
is essen ial.
Tes You sel
An inc ease in which o he elemen s below would
inc ease E iciency
A- Sales
B- Asse s
C- Ne Income
E- Equi y
Tes You sel
An inc ease in which o he elemen s below would
inc ease E iciency
A- Sales
B- Asse s
C- Ne Income
E- Equi y