The DuPont equation shows the relationships among asset management, debt management, and ratios. Management can use the DuPont equation to analyze ways of improving the firm's performance. Its equation is:

Return on equity (ROE) = profit margin * asset turnover * financial leverage

Step-by-step explanation:

Return on equity (ROE) = profit margin * asset turnover * financial leverage

Which can be written as:

ROE = (net income: sales) * (sales : total assets) * (total asset : average shareholder equity)