More value from better business decisions.

The company's task is to maximise owner value.

Gordon condensed it into a formula where NI is the current net income per year, r is the investors' required return and g the assumed growth rate. Holding everything else constant, owner value grows when income grows, risk falls or growth speeds up. Decisions should rest on these.

Note: even if income grows, owner value can still fall — if the company becomes riskier and less stable at the same time, its valuation multiple drops.

Income comes from two levers: margin and turnover.

When Gordon's formula is opened up with DuPont's equation, net income splits into parts: margin (NI ÷ sales), capital turnover (sales ÷ assets) and the amount of capital. If margin improves even a little with everything else constant, value grows. If sales grow so that income grows in euros even slightly, value grows again.

But: if margins fall sharply while turnover improves sharply, the company becomes more sensitive to market price changes — the valuation multiple can drop and take more from the whole than capital efficiency brought. That is why every decision is also judged through the multiple.

The structure of profitability — from numbers you can trust.

Now the previous layer is broken into pieces. Actual figures come from the accounting, and first we make sure they can be trusted at the monthly level. What matters is knowing revenue, variable costs and the contribution margin as their difference, fixed costs — and, if you want more precision, how each cost behaves.

The balance sheet is not yet fully included at this layer. That is why Gordon × DuPont stays synchronised in the background: it reminds us to judge each decision's total effect — including the multiple — and to ask whether the current capital base supports this level of income or becomes a constraint on growth.

You can try exactly this layer with our free tool — adjust the numbers and watch the effect on profit and value instantly.