Shadowing Practice: DuPont analysis explained - Learn English Speaking with Video
Les maken...
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Return on Equity, ROA Return on Assets, ROS Return on Sales.
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This video takes you through the financial ratios of the ROE formula, the ROA formula, the ROS formula, asset turnover and leverage, and shows how they fit together.
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The very basics and the very essence of financial ratio analysis.
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The beauty of financial ratios is that they link together information from two of the three main financial statements, the income statement or profit and loss statement, and the balance sheet.
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This gives you a more holistic view of a company's performance than merely looking at one financial statement in isolation.
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ROE, or Return on Equity, is defined as net income divided by equity.
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In other words, the net profit that the company has generated during a year, divided by the book value of the shareholder capital invested in the company.
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ROE is a measure of the rate of return to shareholders.
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For return on equity, at first sight you would say, the higher this ratio is, the better.
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The return on equity financial ratio becomes more meaningful when you dive into its drivers.
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What made the ROE go up or down versus prior year, if you look at the same company?
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Why is the ROE for two companies in different industries, or even in the same industry, different?
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This is where financial analysts owe a big thank you to the DuPont Corporation, for coming up with the idea of breaking ROE into three distinct elements.
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Let me walk you through these elements, ROS, Asset Turnover and Leverage, shortly.
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But first a trivia question.
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In which period did the DuPont Corporation start using the DuPont analysis?
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Was it the 1890s, the 1920s, the 1950s, or 1980s?
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When you are logged into YouTube and are watching this video from a computer, then please click the voting card on the top right to submit your vote.
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I will explain you first what the DuPont formula is, and then share the answer to the quiz question towards the end of the video.
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Here's the three-part version of the DuPont analysis.
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Mathematically, this split makes little sense, as you are multiplying fraction bars where the denominator in one of the fractions is the numerator in another fraction,
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hence they will cancel each other out when multiplied.
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For financial analysis, to split into three pieces makes a lot of sense.
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The first element, ROS or Return on Sales, is Net Income divided by Sales, which is an indicator of the relative profitability or operating efficiency.
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How many cents of profit are generated for every dollar of sales?
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The higher the ROS, the better.
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The second element is Asset Turnover, calculated as Sales divided by Assets, a measure of asset use efficiency.
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Can we maximize the amount of sales we generate with the assets that we have?
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A solid control of working capital is key here to decrease the denominator of assets.
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What are the terms you negotiate with your customers?
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Are you getting your customers to pay on time?
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Is your manufacturing and supply chain operation efficient, so the amount of inventory or stock along the way is minimized?
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All of those help to minimize the denominator.
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The first two elements together, ROS multiplied by Asset Turnover, form ROA .
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This ratio of ROA has many variations.
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Some companies measure ROIC , ROTC , ROCE or RONOA .
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These are all variations on the same theme.
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You look at the returns generated during a period, and compare them to the capital invested in the company to generate those returns.
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ROA is an indicator of business success, influenced by two factors, ROS or Margin Performance,
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and Asset Turnover, which you could call speed or velocity.
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The last element of the DuPont three-part equation is leverage, assets divided by equity.
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Whether they should be high or low is a much discussed question among business people, finance people, and academics, and I don't think there is a definitive answer.
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On the one side, if you can borrow money, take on debt, at low interest rates, and put this money to productive use, you could grow the company faster, and generate higher returns.
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On the other side, if debt is very high compared to the equity in the company, you could increase the risk profile, and decrease your buffer against bankruptcy.
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We have seen plenty of examples of companies that were too highly leveraged, going under in various financial crises over the years.
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Alright, that's the most commonly known three-step version of the DuPont formula.
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Are you ready for some more excitement?
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You can expand the DuPont formula to five steps if you want even more analytical insight
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into the drivers of where your ROE increase or decrease is coming from.
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The two elements on the right stay the same, asset turnover and leverage.
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However, ROS gets split into three elements.
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Net income divided by earnings before tax, which is called tax burden, earnings before tax divided by EBIT,
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called interest burden, and EBIT divided by sales, which is EBIT percentage.
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In a lot of companies, improving the EBIT percentage and increasing the asset turnover are important targets for the management team, whereas the other elements are for the finance,
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treasury and tax departments to manage.
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To close the loop on the DuPont formula, the answer to the trivia question is that this financial ratio analysis method came into use in the 1920s.
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It is still in ubiquitous use, and it can help you to understand the drivers of performance for your company.
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So thank you very much to Donaldson Brown of the DuPont Corporation!
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On the Finance Storyteller YouTube channel, you can find lots of well-researched videos explaining business, finance and accounting topics.
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Please subscribe to the Finance Storyteller channel, and take the time to like the video and comment below.
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On average, I post one new video per week.
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If you subscribe to the channel, you will be the first to see it!
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Woordenschat en spreektips bij deze les
Deze spreekles op niveau C1 is gebaseerd op de video “DuPont analysis explained”. Deze woorden komen het vaakst terug: asset, return, Dupont, financial, element. Deze video bevat 62 zinnen en 996 woorden om na te spreken. Het gesproken deel duurt 6:15. De spreker praat in een natuurlijk tempo van ongeveer 160 woorden per minuut, dicht bij een alledaags gesprek. Slechts 78% van de woorden hoort bij de 3.000 meest gebruikte Engelse woorden, dus de woordenschat is pittig. 10 van de 62 zinnen zijn vragen, dus het is goede oefening voor vraagintonatie en korte antwoorden.
Belangrijke woorden in deze video
De 15 moeilijkste woorden uit de video, met uitspraak en betekenis:
| Woord | Uitspraak | Betekenis |
|---|---|---|
| turnover zelfstandig naamwoord | /ˈtɝnoʊvɚ/ | omzet, zakencijfer |
| leverage zelfstandig naamwoord | /ˈlɛv.(ə.)ɹɪd͡ʒ/ | hefboom, hefboomkracht |
| denominator zelfstandig naamwoord | /dɪˈnɒmɪneɪtə(ɹ)/ | noemer |
| multiply werkwoord | /ˈmʌltɪplaɪ/ | vermenigvuldigen |
| fraction zelfstandig naamwoord | /ˈfɹæk.ʃən/ | fractie |
| trivia zelfstandig naamwoord | /ˈtɹɪvi.ə/ | trivia |
| indicator zelfstandig naamwoord | /ˈɪn.dɪˌkeɪ.tə(ɹ)/ | richtingaanwijzer |
| subscribe werkwoord | /səbˈskɹaɪb/ | abonneren |
| variation zelfstandig naamwoord | /ˌvɛəɹiˈeɪʃn̩/ | afwisseling, variatie |
| mathematically bijwoord | wiskundig | |
| numerator zelfstandig naamwoord | /ˈnuː.məɹˌeɪ̯.təɹ/ | teller |
| profitability zelfstandig naamwoord | /ˌpɹɑ.fɪ.təˈbɪl.ɪ.ti/ | winstgevendheid, rentabiliteit |
| ubiquitous bijvoeglijk naamwoord | /juːˈbɪkwɪtəs/ | alomtegenwoordig, overal aanwezig |
| maximize werkwoord | /ˈmæksəmaɪz/ | maximaliseren |
| buffer zelfstandig naamwoord | /ˈbʌfəɹ/ | buffermengsel |
Phrasal verbs die je zult horen
| Woord | Betekenis |
|---|---|
| come up with werkwoord | bedenken, verzinnen |
Zinnen om te herhalen
Korte, volledige zinnen uit de video die je in alledaagse gesprekken kunt gebruiken:
- What are the terms you negotiate with your customers?
- Are you getting your customers to pay on time?
- Are you ready for some more excitement?
Grammatica in deze video
De structuren die de spreker het meest gebruikt, met de exacte woorden uit de video:
| Structuur | In de video |
|---|---|
| Lijdende vorm be + voltooid deelwoord — het gaat om wat er gebeurt, niet om wie het doet | is defined · are logged · are generated |
| Betrekkelijke bijzinnen who / which + zin — extra informatie over een persoon of ding | Sales, which is · tax, which is |
| Present perfect have/has + voltooid deelwoord — iets uit het verleden dat nu nog telt | has generated · have seen |
Uitspraak om op te letten
- De klanken “sh” en “zh”: fraction /ˈfɹæk.ʃən/, shareholder /ˈʃɛəˌhəʊl.də(ɹ)/, variation /ˌvɛəɹiˈeɪʃn̩/, negotiate /nəˈɡəʊ.ʃi.eɪt/, isolation /ˌaɪsəˈleɪʃən/
- Lange woorden — let op de klemtoon: denominator /dɪˈnɒmɪneɪtə(ɹ)/, indicator /ˈɪn.dɪˌkeɪ.tə(ɹ)/, numerator /ˈnuː.məɹˌeɪ̯.təɹ/, profitability /ˌpɹɑ.fɪ.təˈbɪl.ɪ.ti/, ubiquitous /juːˈbɪkwɪtəs/
Klanken die Nederlandstaligen lastig vinden:
- Stemhebbende eindmedeklinker — /b/, /d/, /g/, /z/, /v/ niet verscherpen: leverage /ˈlɛv.(ə.)ɹɪd͡ʒ/, minimize /ˈmɪn.ɪˌmaɪz/, subscribe /səbˈskɹaɪb/, maximize /ˈmæksəmaɪz/, definitive /dɪˈfɪn.ɪ.tɪv/
- /æ/ — opener dan de Nederlandse “e”: fraction /ˈfɹæk.ʃən/, maximize /ˈmæksəmaɪz/, analytical /ˌæn.əˈlɪt.ɪ.kəl/, calculate /ˈkælkjʊleɪt/, analyst /ˈænəlɪst/
- /w/ — met ronde lippen: ubiquitous /juːˈbɪkwɪtəs/, quiz /kwɪz/, equation /ɪˈkweɪ.ʒən/
Zo oefen je met deze video
- Luister de hele video één keer zonder te spreken en noteer de woorden die je niet kent.
- Begin op 0,75× snelheid, spreek zin voor zin na en ga terug naar normale snelheid zodra het makkelijk gaat.
- Neem jezelf op en vergelijk met het origineel; let daarbij op woorden als turnover, leverage, denominator.
Wat is de Shadowing-techniek?
Shadowing is een wetenschappelijk onderbouwde taalleermethode die oorspronkelijk is ontwikkeld voor professionele tolkentraining en gepopulariseerd door polyglot Dr. Alexander Arguelles. De methode is eenvoudig maar krachtig: je luistert naar native Engelse audio en herhaalt het onmiddellijk hardop — als een schaduw die de spreker volgt met slechts 1–2 seconden vertraging. In tegenstelling tot passief luisteren of grammaticadrills, dwingt shadowing je hersenen en mondspieren om echte spraakpatronen tegelijkertijd te verwerken en te reproduceren. Onderzoek toont aan dat het de uitspraaknauwkeurigheid, intonatie, ritme, verbonden spraak, luisterbegrip en spreekvaardigheid aanzienlijk verbetert — waardoor het een van de meest effectieve methoden is voor IELTS Speaking-voorbereiding en echte Engelse communicatie.