Reply to this comment ROA stands for Return on Asset. It is one of the metrics...
Reply to this comment
ROA stands for Return on Asset. It is one of the metrics used by investors to evaluate the stock and the ability it has in generating profit. The formula is basically the net income divided by the total assets.It measures how efficient the company is in generating profits over all the assets and resources it owns or controls. It can be sign that the company is not going well if the the ROA is low meaning the inability of generating return.
ROE stands for Return on Equity. It is also one of the metrics used by investors to analyze the company numbers an ability to generate profit. Investors use this measure to decide about invest or not in the company. By dividing the net income by the shareholders equity investor find the ROE. The sign of a good business with a growth potential is a high ROE which increases the stock and the intrinsic value.
Homework Answers
ROA is an efficiency ratio. It is used to measure the degree of efficiency with which the assets employed in the business are used. However it does not show the real value added to the shareholders. The disadvantage of using this ratio is that it motivates the management to continue to use the old assets rather than investing in new assets.
Return on equity is a profitability ratio which is popularly used by shareholders to determine if they must invest in the company. It is calculated by dividing net income by the equity employed in the company. However it can be misleading especially in case of new companies where the initial equity investment is higher resulting in lower return on equity.
Add Answer to:
Reply to this comment
ROA stands for Return on Asset. It is one of the metrics...
a. Compute the return on assets (ROA) for 2018 and 2017. Round answers to one decimal...
a. Compute the return on assets (ROA) for 2018 and 2017. Round
answers to one decimal place (ex: 0.2345 = 23.5%).
b. Compute the profit margin (PM) for 2018 and 2017.
Round answers to one decimal place (ex: 0.2345 = 23.5%).
c. Compute the asset turnover (AT) for 2018 and 2017.
Round answers to two decimal places.
d. Which component of ROA (profit margin or asset turnover or
both) drives the change in ROA in 2018?
e. Compute the return...
1. Computing ROE and ROA: Both ROA and ROE measure profitability. Which one is more useful for...
1. Computing ROE and ROA: Both ROA and ROE measure profitability. Which one is more useful for comparing two companies? Why? 2. (Graded) Ratio Analysis: Consider the ratio EBITD/Assets. What does this ratio tell us? Why might it be more useful than ROA in comparing two companies? 3. Return on Investment: A ratio that is becoming more widely used is return on investment. Return on investment is calculated as net income divided by long-term liabilities plus equity. What do you think return on...
Data from the financial statements of Beautiful Candle Company included the following: Click the icon to...
Data from the financial statements of Beautiful Candle Company included the following: Click the icon to view the data.) Read the requirements. Requirements 1. Calculate the following ratios: a. Net profit margin; b. Asset turnover ratio, c. Leverage ratio, d. Return on assets (ROA); e. Return on equity (ROE). a. Begin by selecting the formula labels and then enter the amounts to calculate net profit margin. (Round your answer to one decimal place, X.X%.) = Net profit margin ratio %...
.1) Profit Margin (PM) .2) Retention ratio (R) .3) return on assets (ROA) .4) Return on...
.1) Profit Margin (PM)
.2) Retention ratio (R)
.3) return on assets (ROA)
.4) Return on equity (ROE)
.5) DEBT equity ratio (D/E)
.6) Use the ratios computed to calculate the external financing
needed (EFN)
The most recent income statement and balance sheet for the T. McGraw Corporation are as follows: T. MCGRAW CORPORATION Financial Statements Income Statement Sales - Costs Taxable Income - Taxes (34%) Net Income $10,000 7,500 $ 2,500 850 $ 1,650 Retained earnings Dividends $ 660...
Financial Ratio 2 - Interpretation Debt: Interest Coverage Ratio [ EBIT/int. exp] : - would it...
Financial Ratio 2 - Interpretation Debt: Interest Coverage Ratio [ EBIT/int. exp] : - would it make sense to use the cash version of EBIT? Return on Assets [operating return on assets = ROA = operating Profits / Total Assets] - Any linkage between ROA and Valuation equation [ V0 = CF/(1+r)^t ] ? Operating Profit Margin [OPM = EBIT/ SALES]: - what pictures of operating efficiency do ROA and OPM give to us? Asset Turnover [Sales/ Assets] This is...
Rippard's has a debt ratio of 27 percent, a total asset turnover ratio of 1.3 and...
Rippard's has a debt ratio of 27 percent, a total asset turnover ratio of 1.3 and a return on equity (ROE) of 63 percent. Compute Rippard's net profit margin. (Record your answer as a percent rounded to one decimal place but do not include the percent sign in your answer. Thus, record.32184 = 32.1% as 32.1). Your Answer: A firm has net income of $300,000 and sales of $10,000,000. Its interest expense is $200,000 and the firm's tax rate is...
Compute, Disaggregate, and Interpret Competitors' Rates of Return Selected balance sheet and income statement information for...
Compute, Disaggregate, and Interpret Competitors' Rates of Return Selected balance sheet and income statement information for the drug retailers CVS Health Corporation and Walgreen Co, follows. Assume tax rate of 35%. ($ millions) CVS Health Walgreen Sales revenue-2014 $139,367 $76,392 Interest expense-2014 600 156 Net income-2014 4,644 2,031 Total assets-2014 74,252 37,182 Total assets-2013 71,526 35,481 Stockholders' equity-2014 37,963 20,561 Stockholders' equity-2013 37,938 19,454 a. Compute the 2014 return on assets (ROA) for each company. (Round your answers to one...
Return on Investment, DuPont Analysis and Financial Leverage The following table presents selected 2016 financial information...
Return on Investment, DuPont Analysis and Financial Leverage The following table presents selected 2016 financial information for Sunder Company Sunder Company Selected 2016 Financial Data Balance Sheet: Average total assets $1,000,000 Average total liabilities 500,000 Average stockholders' equity 500,000 Income Statement Sales revenue $1,000,000 Earnings before interest (net of tax) 20,000 Interest expense (net of tax) 15,000 5,000 Net income Round answers to one decimal place (i.e., 0.0025 = 0.3%). Use negative signs with answers, when appropriate. a. Compute Sunder's...
2-17 Horatio's Hot Dogs' current assets equal $260,000. The company's return on assets (ROA) is 4...
2-17 Horatio's Hot Dogs' current assets equal $260,000. The company's return on assets (ROA) is 4 percent, its net income is $140,000, its long- term debt equals $1,755,000, and 35 percent of its assets are financed with common equity. Horatio's has no preferred stock. Compute the company's current ratio. At the end of the year, Wrinkle Free Laundry (WFL) had $150,000 in total assets. (a) If wFL's total assets turnover was 2.0, what were its sales revenues? (b) If WFL's...
14. The DuPont equation Corporate decision makers and analysts often use a technique called DuPont analysis to understand and assess the factors that drive a company’s financial performance, as measur...
14. The DuPont equation Corporate decision makers and analysts often use a technique called DuPont analysis to understand and assess the factors that drive a company’s financial performance, as measured by its return on equity (ROE). Depending on the version used, the DuPont equation will deconstruct the firm’s ROE, its best measure of financial performance, into two or three important factors, or drivers. DuPont analysis can be conducted using either the traditional DuPont equation or the extended DuPont equation. The...
a. Compute the return on assets (ROA) for 2018 and 2017. Round
answers to one decimal place (ex: 0.2345 = 23.5%).
b. Compute the profit margin (PM) for 2018 and 2017.
Round answers to one decimal place (ex: 0.2345 = 23.5%).
c. Compute the asset turnover (AT) for 2018 and 2017.
Round answers to two decimal places.
d. Which component of ROA (profit margin or asset turnover or
both) drives the change in ROA in 2018?
e. Compute the return...
Data from the financial statements of Beautiful Candle Company included the following: Click the icon to view the data.) Read the requirements. Requirements 1. Calculate the following ratios: a. Net profit margin; b. Asset turnover ratio, c. Leverage ratio, d. Return on assets (ROA); e. Return on equity (ROE). a. Begin by selecting the formula labels and then enter the amounts to calculate net profit margin. (Round your answer to one decimal place, X.X%.) = Net profit margin ratio %...
.1) Profit Margin (PM)
.2) Retention ratio (R)
.3) return on assets (ROA)
.4) Return on equity (ROE)
.5) DEBT equity ratio (D/E)
.6) Use the ratios computed to calculate the external financing
needed (EFN)
The most recent income statement and balance sheet for the T. McGraw Corporation are as follows: T. MCGRAW CORPORATION Financial Statements Income Statement Sales - Costs Taxable Income - Taxes (34%) Net Income $10,000 7,500 $ 2,500 850 $ 1,650 Retained earnings Dividends $ 660...
Rippard's has a debt ratio of 27 percent, a total asset turnover ratio of 1.3 and a return on equity (ROE) of 63 percent. Compute Rippard's net profit margin. (Record your answer as a percent rounded to one decimal place but do not include the percent sign in your answer. Thus, record.32184 = 32.1% as 32.1). Your Answer: A firm has net income of $300,000 and sales of $10,000,000. Its interest expense is $200,000 and the firm's tax rate is...
Compute, Disaggregate, and Interpret Competitors' Rates of Return Selected balance sheet and income statement information for the drug retailers CVS Health Corporation and Walgreen Co, follows. Assume tax rate of 35%. ($ millions) CVS Health Walgreen Sales revenue-2014 $139,367 $76,392 Interest expense-2014 600 156 Net income-2014 4,644 2,031 Total assets-2014 74,252 37,182 Total assets-2013 71,526 35,481 Stockholders' equity-2014 37,963 20,561 Stockholders' equity-2013 37,938 19,454 a. Compute the 2014 return on assets (ROA) for each company. (Round your answers to one...
Return on Investment, DuPont Analysis and Financial Leverage The following table presents selected 2016 financial information for Sunder Company Sunder Company Selected 2016 Financial Data Balance Sheet: Average total assets $1,000,000 Average total liabilities 500,000 Average stockholders' equity 500,000 Income Statement Sales revenue $1,000,000 Earnings before interest (net of tax) 20,000 Interest expense (net of tax) 15,000 5,000 Net income Round answers to one decimal place (i.e., 0.0025 = 0.3%). Use negative signs with answers, when appropriate. a. Compute Sunder's...
2-17 Horatio's Hot Dogs' current assets equal $260,000. The company's return on assets (ROA) is 4 percent, its net income is $140,000, its long- term debt equals $1,755,000, and 35 percent of its assets are financed with common equity. Horatio's has no preferred stock. Compute the company's current ratio. At the end of the year, Wrinkle Free Laundry (WFL) had $150,000 in total assets. (a) If wFL's total assets turnover was 2.0, what were its sales revenues? (b) If WFL's...
Most questions answered within 3 hours.
-
A disk of m=5 kg and radius r=2 m starts from rest and rolls
down a...
asked 25 seconds ago -
**Write and support a Value Proposition of your client's
business. Limit your Value Proposition to a...
asked 7 seconds ago -
38)
A mediator is a third party who listens to each side of the
problem and...
asked 6 minutes ago -
A river 105.1 m wide flows toward the south at 33.6 m/min. A
girl on the...
asked 5 minutes ago -
II.
MONOHYBRID PROBLEMS WITH INCOMPLETE DOMINANCE
8. Petunia
flower color is governed by two alleles, but...
asked 8 minutes ago -
Calculate the mass of sodium propionate (NaC3H5O2 96.061g/mol)
that needs to be added to 143.0g of...
asked 20 minutes ago -
Explain the process of An oxidation reduction reaction and how it
is related to the movement...
asked 21 minutes ago -
Comment on the harm reduction model as presented
here and in other literature you may have...
asked 23 minutes ago -
If
a penny and a piece of a brick that is the size and mass of...
asked 42 minutes ago -
Does Brazil have a city that is an important financial center?
Does Brazil have its own...
asked 42 minutes ago -
Elizabeth Soltis owns and operates Aunt Ibby's Styling Salon. A
year-end work sheet is provided below....
asked 43 minutes ago -
The following income statement items appeared on the adjusted
trial balance of Schembri Manufacturing Corporation for...
asked 1 hour ago