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T. Manjunatha, Praveen Gujjar J.
Information Technology Companies are essential for development of any country’s economy. Analysts can obtain useful information by analyzing company's recent financial statements and comparing the results with other companies in the same sector. In this paper we considered selected software and Networking companies in India to test whether extended DuPont model can be used to measure the performance of software and Networking companies in Indian context. We have calculated return on equity by extended DuPont model. Result shows that DuPont model can be used to measure the performance of software and networking companies and there is a positive relationship between profit margin, asset turnover and ROE. This paper suggests that further study can conducted by using extended DuPont model in other industries to see if it can explain the total variation in ROE as it has in the Indian Information Technology companies.
DuPont Analysis, ROE, Margin Ratios, Turn over Ratios, Leverage Ratios.