However, factor analysis is feasible in the field that DuPont analysis cannot. Factor analysis is mainly used for determining the influence direction and degree of every factor in the total change in some kind of economic phenomenon affected by many factors (Bartholomew; Steele, et al, 2008). Factor analysis is the application and development of index method principle. It’s based on the index method principle. In the analysis of things change influenced by many factors, in order to observe the effects of some factors change, it will make other factors be fixed, and then analyze and replace item by item, so this method is also known as sequential substitution method (Harman, 1976). Based on comparative analysis, factor analysis is frequently used to find differences in the process of comparing and fatherly explore the cause (Larsen; Warne, 2010). Using factor analysis method, the first step is to study the formation process of the object and find various factors of analysis object; then to compare factors with the corresponding criterion item by item to determine the influence degree of differences of every factors, to help find the main contradiction and indicate the main direction of solving the problem for the next step. For instance, the relationship of a financial value and related factors can be represented as: Actual value: P1= A1xB2xC1; Standard value: P2=A2xB2xC2. The overall variance between the actual value and standard value is P1-P2, and it’s affected by three factors, namely A, B and C. The degree of influence of every factor can be calculated as: Influence of factor A: (A1-A2) xB2xC2; Influence of factor B: A1x (B1-B2) xC2; Influence of factor C: A1xB1x (C1-C2). Plus the above influence value, it is the overall variance: P1-P2. From the above analysis, it can be seen that factor analysis can be used for the detailed analysis of the degree of influence and can be more beneficial to guide the decision makers to find financial issues and propose solutions.
In conclusion, DuPont analysis and factor analysis have their own range of application. Through DuPont analysis system can provide better reasons and trends of financial index changes, factor analysis is better in enterprises’ financial analysis. Factor analysis can be used for more detailed analysis of the degree of influence and can be more beneficial to guide the decision makers to find financial issues ultimately and propose solutions fundamentally. In sum, factor analysis method has more extensive scope of application.