NVIDIA's DuPont decomposition — the transfer test

mentor: You decomposed Coca-Cola's return on equityDefinitionReturn on equityNet income as a share of average shareholders' equity — the accounting return the company earns on its owners' capital. Read it through the DuPont decomposition to see whether profitability, efficiency, or leverage is producing it.ROE = Net income ÷ Average shareholders' equityDrivers: Profitability · Efficiency · LeverageFull definition → into three factors: what survives each sales dollar, how hard the asset base works, and how much of that base the owners funded. A decomposition is only a tool if it travels — the same three ratios must explain a fabless chip designer as cleanly as a century-old beverage company.

Below are NVIDIA's four filed inputs from its latest annual reportDefinitionForm 10-KThe audited annual report a US public company files with the SEC — the most complete single document about a business: audited financial statements, management's discussion, risk factors, and the auditor's own opinion. It is the primary source nearly every figure on Echelon grounds to.One 10-K = audited statements + MD&A + risk factors + auditor's reportDrivers: Assurance · Cadence · Restated comparativesFull definition → (Form 10-K), via SEC EDGAR: two income-statement lines and two balance-sheet instants at the same period end. Run the decomposition, check the product recomposes the return, and read which factor does the work.

Net marginDefinitionNet marginNet income as a share of revenue — the bottom line after every cost: operations, interest, taxes, and one-offs. It is the margin the income statement ends on, and the profitability input to DuPont ROE analysis.Net margin = Net income ÷ RevenueDrivers: Operating margin · Interest · Tax rate · One-offsFull definition → = net income ÷ revenue. Asset turnoverDefinitionAsset turnoverRevenue generated per dollar of assets — the efficiency lever of the DuPont decomposition. Asset-light models turn assets fast at thin margins; asset-heavy models turn slowly at (usually) wider margins. The product of the two is what matters.Asset turnover = Revenue ÷ Average total assetsDrivers: Utilization · Asset intensity · PricingFull definition → = revenue ÷ total assets. Equity multiplierDefinitionEquity multiplierTotal assets divided by stockholders' equity — how many dollars of assets the company operates for each dollar the owners actually funded. It is the leverage leg of the DuPont decomposition: the same operating performance produces a higher return on equity when a thinner equity slice funds the asset base.Equity multiplier = Total assets ÷ Stockholders' equityDrivers: Debt load · Buybacks & dividends · Retained earningsFull definition → = total assets ÷ stockholders' equity. Their product is net income ÷ equity — the return on equityDefinitionReturn on equityNet income as a share of average shareholders' equity — the accounting return the company earns on its owners' capital. Read it through the DuPont decomposition to see whether profitability, efficiency, or leverage is producing it.ROE = Net income ÷ Average shareholders' equityDrivers: Profitability · Efficiency · LeverageFull definition →.