Describe at least three approaches we can use to improve the Return on equity? Explain why?...

Question

Question

Describe at least three approaches we can use to improve the Return on equity? Explain why?

Hint: review the DuPont Identity.

Answer 1

Answer #1

As per DuPont identity, Return on equity = profit margin*asset turnover ratio*Equity Multiplier

I.e. net income/sales * sales/total assets * total assets/equity

Hence, 3 approaches in which we can improve return on equity are

1. Improve profit margin I.e. net income/sales

2. Improve asset turnover ratio I.e. sales/total assets

3. Improve equity multiples I.e. by reducing proportion of equity in total assets

Answer 2

Similar Homework Help Questions

Describe at least two distinct approaches to studying beach ecosystem use by terrestrial vertebrates. For each,...

Describe at least two distinct approaches to studying beach ecosystem use by terrestrial vertebrates. For each, what can and can’t we learn? (word limit 150)
1. Briefly describe the three approaches that are used to estimate the cost of common equity....

1. Briefly describe the three approaches that are used to estimate the cost of common equity. Which approach is most commonly used in practice, and why? Post a follow-up question to further the discussion. 2.What is the preemptive right? How important is this to the average stockholder of a firm whose shares are traded on the NYSE? Is this more important to stockholders of publicly owned or privately held firms? Explain.
Describe at least three ways computer viruses can spread. Explain why computer worms are bigger threat...

Describe at least three ways computer viruses can spread. Explain why computer worms are bigger threat to computer security than computer viruses.

Describe at least three benefits of patient portals and explain why these benefits are important for...

Describe at least three benefits of patient portals and explain why these benefits are important for practice. Be specific and provide examples Explain how patient portals contribute to patient-centered care. Explain how patient portals are changing the nature of the patient provider relationship Explain how patient generated health data can contribute to the continuity, quality, and safety of care.
break(s) down the return-on-equity into three components. Asset management ratios Profitability ratios Market value ratios The...

break(s) down the return-on-equity into three components. Asset management ratios Profitability ratios Market value ratios The DuPont identity
Describe the concept of a master-transaction file relationship and explain some approaches you can use to...

Describe the concept of a master-transaction file relationship and explain some approaches you can use to update the master file.

Explain at least three useful coping strategies for nurse leaders. Explain why it is important for...

Explain at least three useful coping strategies for nurse leaders. Explain why it is important for nurse leaders to care for self in order to be role models and demonstrate the five pillars of caring for others. Describe three effective strategies that nursing leaders can use to foster and promote healthy behaviors and achieve balance and a healthy lifestyle.
Explain at least three useful coping strategies for nurse leaders. Explain why it is important for...

Explain at least three useful coping strategies for nurse leaders. Explain why it is important for nurse leaders to care for self in order to be role models and demonstrate the five pillars of caring for others. Describe three effective strategies that nursing leaders can use to foster and promote healthy behaviors and achieve balance and a healthy lifestyle.
What are the three approaches to GDP measurement? Explain why, in a simple economy, the three...

What are the three approaches to GDP measurement? Explain why, in a simple economy, the three approaches would yield the same figure for the value of total production.

9. Describe at least two positive aspects (benefits or reasons why we use them) of sanitar...

9. Describe at least two positive aspects (benefits or reasons why we use them) of sanitar landfills AND at least two problems or negative aspects of sanitary landfills