Indian Journal of Finance

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DuPont Analysis of Luxury Industry and Market Portfolio : A Comparative Study


Affiliations
1 Shyam Lal College, University of Delhi, Shahdara, Delhi - 110 032, India
2 Bharati College, University of Delhi, Janakpuri, New Delhi - 110 058, India

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The measurement of financial performance is primarily based on return on equity (ROE) ratio. The DuPont model analyzes the sources of financial performance (ROE) of a firm. The luxury industry tends to drive high profitability in the market vis-a-vis the market counterparts. Is this an enough evidence to believe that the ROE is majorly contributed by profitability of the luxury firms ? The study intended to test the impact of firms’ profitability, asset efficiency, and financial leverage on ROE in the luxury industry (LI) and the non-luxury industry (NLI). The paper conducted the DuPont analysis, and a comparison between luxury industry and non-luxury industry was drawn. The empirical findings claimed that the maximum beta-coefficient was contributed by efficiency of a firm, which was measured by ATR for dependent variable ROE. On establishing a comparison, the results were found to be similar even in the luxury industry.

Keywords

Financial Performance, Luxury Industry, DuPont Model, ROE.

JEL Classification : E22, F65, L25, M41.

Paper Submission Date : September 15, 2019 ; Paper Sent Back for Revision : February 15, 2020 ; Paper Acceptance Date : April 30, 2020.

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  • DuPont Analysis of Luxury Industry and Market Portfolio : A Comparative Study

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Authors

Neha Bothra
Shyam Lal College, University of Delhi, Shahdara, Delhi - 110 032, India
Saloni Gupta
Bharati College, University of Delhi, Janakpuri, New Delhi - 110 058, India

Abstract


The measurement of financial performance is primarily based on return on equity (ROE) ratio. The DuPont model analyzes the sources of financial performance (ROE) of a firm. The luxury industry tends to drive high profitability in the market vis-a-vis the market counterparts. Is this an enough evidence to believe that the ROE is majorly contributed by profitability of the luxury firms ? The study intended to test the impact of firms’ profitability, asset efficiency, and financial leverage on ROE in the luxury industry (LI) and the non-luxury industry (NLI). The paper conducted the DuPont analysis, and a comparison between luxury industry and non-luxury industry was drawn. The empirical findings claimed that the maximum beta-coefficient was contributed by efficiency of a firm, which was measured by ATR for dependent variable ROE. On establishing a comparison, the results were found to be similar even in the luxury industry.

Keywords


Financial Performance, Luxury Industry, DuPont Model, ROE.

JEL Classification : E22, F65, L25, M41.

Paper Submission Date : September 15, 2019 ; Paper Sent Back for Revision : February 15, 2020 ; Paper Acceptance Date : April 30, 2020.


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DOI: https://doi.org/10.17010/ijf%2F2020%2Fv14i10-11%2F155969