Pulling the Levers to Improve Profitability
From AgriMarketing Magazine - Wouldn’t operating an agribusiness be much easier if it were possible to simply pull a lever and improve profitability? Although not quite that effortless, the DuPont Financial Analysis Model is a rather straightforward method for assessing the factors that influence a firm’s financial performance. This model identifies three “levers” of profitability of the firm as measured by return on equity. These three levers are (1) margins or return on sales, (2) asset turnover and (3) financial leverage. More simply stated, these levers are “earns, turns, and leverage.” We will first introduce the model and then discuss each of these levers in this twopart series. The DuPont Analysis framework will be used specifically to demonstrate the critical role of marketing as a driver of profitability.