Question

When I pulled up the financial report for my organization (industry), I'll have to say i was a bit intimidated, so for the purpose of the discussion I did a quick ROI vs, ROE trend analysis. If normal ranges are between 8-10%, then What this tells me is that 2019 was an above average year, while seeing a decline in the subsequent years. Although there was also a downward trend in the ROE, shareholders would be more that happy with these double digit returns. The dip in the Net Earnings has a direct effect on the ROI (Let's assume this frictional business is in the service industry). Improvements in customer satisfaction drives this industry and performance, so looking at these two metrics for areas of improvement may drive revenue.

Net Earnings 2019 2018 50000 30000 507500 50500 2017 28500 507500 Average Total Assets Average Total Equity 248520 248520 248520 ROI 9.85% 5.91% 5.62% ROE 20.12% 12.07% 11.47%

1. comment on the identified trends to share your perspective on the trend and types of projects that may assist industry companies. comment in a few paragraphs

Answer 1

The comment for different items may be as follows:

1. Net Earnings - It has grown by 75% from 2017 to 2019. However the growth from 2017 to 2018 was meagre. The major growth was seen in 2019 over 2018. It is positive sign and shows the performance of the entity is increasing over the years but with uncertain growth percentage.

2. ROI and ROE - These two can sometimes be representative of each other. While sometimes, it is important to analyze them individually.

In the given situation, since the average assets and equity has not been changed significantly, both ROI and ROE can be analyzed simultaneously.

Due to increase in net earnings overtime, the ROI and ROE have seen almost double the growth from 2017 to 2019. The growth from YoY(year on year) has not been in equal trends as growth from 2017 to 2018 was quite low as compared to 2018 to 2019 financial year.

As per the limited data available, it can be concluded that the entity is showing positive signs of growth overall.