Theoretical Study On List-Company Based Du Pont System Of Financial Analysis

Making profit is an important prerequisite for the survival and development of a corporation, which is the chief financial target for corporations to realize, and it is also the most basic power source for a corporation to go in for operating. However, in today's marketing economy, the effect of marketing mechanism makes the profit of any market body has its unsteadiness, that is the market body inevitably has to undertake some risks. Under these circumstances, it seems unreal if corporations, as the main body of the market, want to put themselves in an invincible position and always keep a higher profit. However, as for listed company, it is very important to keep good operating performance, because it is not only good for shareholders to have more confidence in investment, but also good for corporations gaining good credit grade and lower the cost of capital, etc. In consideration of this, some listed company may provide false messages through the method such as whitewash financial report, to mislead message demanders, and then make them do incorrect evaluation for the operating condition of a corporation. Therefore, how to evaluate the operating performance of listed company correctly seems even more significant.To make a correct evaluation for the operating performance of a listed company, financial analysis is really significant, among which Du Pont system is the most proper financial analysis method for the operating performance evaluation of listed company. Financial analysis can not only evaluate the past and reflect the present condition of a corporation, but also can predict its future developing tendency through it, so the stakeholders can comprehend the operating, financial and gaining condition by studying the financial report of listed company, thus they can make correct evaluation on their operating performance. Moreover, the problems of a corporation on operating and managing must be reviewed on the financial problems ultimately, the standard of financial management will directly influence the success and failure of a corporation, and the financial situation will be finally reflected through the outcome of financial analysis. Therefore, we can say that non-financial analysis is the test and supplement of financial analysis. So this paper laid particular emphasis on the financial analysis- Du Pont system's systematic research.This thesis firstly points out that Dupont financial analysis is nowadays' most proper method on making comprehensive financial analysis for listed company on the basis of studying financial analysis methods now available. Secondly, it makes a systematical study upon Du Pont System of financial analysis, which expands on the theoretical basis for the existing of Du Pont System, and the reasons for its continuous development and the possibility and necessarily for its practice in China. Meanwhile, it also points out that the Du Pont System is not perfectly satisfactory, and then analyzes the disadvantages of its applying in listed company. Thirdly, beforeimproving the Du Pont System, the author compounds and proves the essence of it—what-if analysis, and then analyses the defects of it, which are revised by integral. Then this thesis overcomes the difficulty that how to precisely calculate the influence of all factors to the index. Based on this, the thesis takes the particularity of the financial ratios of listed company into account, and combines the limitations of Du Pont analysis method, puts forward two different kinds of financial analysis theories which will be more fit for listed company, and also analyses the probability of the practice of the improved Du Pont System. In the end, this thesis probes into how to consummate Du Pont System. In a word, this thesis makes systematical study on Du Pont financial analysis method, in order to promote the likelihood of its practice in China and expand the fields in which it can be applied.