In accounting, the DuPont Model is one way of representing return on investment (ROI), a measure of how effective a firm is in increasing its value. For most businesses, typical ROI trends around 10%.

Arithmetically, the DuPont Model is the product of margin and turnover. Margin, sometimes called profit margin, is defined as the ratio of net income to sales, and represents profitability - profit a firm realizes above expenses. A higher margin results in a higher ROI. Turnover - more specifically, asset turnover - is defined as the ratio of sales to average total assets, and illustrates productivity - how effectively a business uses its assets. Like margin, higher turnover results in a higher ROI.

For a traditional manufacturing or consumer goods business, the impact of adjusting levers within the DuPont Model is readily understood. Increasing the margin through selling goods at higher prices or producing them for lower costs clearly results in a higher ROI. Increasing turnover by reducing inventories or increasing the productive time of plant and equipment also understandably increases ROI.

In this vein, the DuPont Model can be applied to cost-benefit analysis. Perhaps to increase margins a firm produces a new good that requires more production time and thus reduces turnover. If the increase in margins outweighs the reduction in turnover, producing the new good is worthwhile and its production adds value to the firm. In contrast, if the decrease in turnover incurred through the production of the new good is greater than the increase in margin, production of the new good is not worthwhile.

Furthermore, the DuPont Model can be used to illustrate how two very opposite business models both generate positive returns. Consider a "big-box" warehouse chain - in such a business, as a result of "price-match guarantees", the margins are understandably very tight - return in such a business is driven by volume. Such businesses have high turnover. At the other end of the spectrum lies the luxury goods dealer, where margins are high and prices are "marked-up" considerably. The high prices result in lower sales volume and lower turnover and consequently, return is determined by the margin.

For a less-traditional business such as a creative firm, where inventory is low or nonexistent, plant and equipment assets are kept to a minimum, and expenses beyond salaries are low, application of the DuPont Model is more abstract. For example, a self-employed sole-proprietor who has no expenses other than his own salary and is running an internet business that requires no equipment assets beyond a web-connected laptop would appear to have extremely high returns according to the DuPont Model. Of course, the scalability of such a business model is limited by demand for online content.

Scalability is one factor that return alone does not capture. Although a business opportunity that results in turning $0.001 into $0.002 has a 100% return, such a return would need to be repeated many times over to realize significant profits. Thus, business is limited by market space and the ability to scale-up such small-margin projects to significant volumes.

Another inherent issue with ROI calculations is the limitations surrounding valuation of intangibles. Creative assets such as blog posts may prove quite difficult to value - perhaps the content is not copyrighted. If the blog post has no tangible asset value and it generates advertisement revenue through web traffic, the blogger may recognize nearly infinite turnover! Of course, there was significant human capital outlay in the creation of the blog post, beyond what a salary expense alone might cover. It is difficult to value the blogger's personal experiences and education that essentially drive his creative business.

Several noted business authors, such as Seth Godin and Daniel Pink, have claimed that the future of economic opportunity lies in creative opportunities. Application of the DuPont Model to the manufacturing and retail industries exemplifies how traditional businesses are in a constant flux between maximizing margin and maximizing turnover, often times with business decisions centered on hair-line increases in margin or turnover.

Ultimately, a creative business where the greatest assets are human capital breaks the mold and the traditional interpretation of the DuPont Model as a profitability-productivity tug-of-war. The creative factor, as noted in the blogging example, changes the rules. The DuPont Model shows that businesses with limited assets and therefore, high turnover have large returns-on-investment. Creative businesses align with these criteria and thus, have potential as drivers of future economic growth.