Interpreting Financial Results Based on Corporate Strategy
In this chapter, we discussed the importance of analyzing financial results based on an understanding of the company's business strategy. Using the ROE model, we illustrated how different strategies could earn high returns for investors. Assume that two companies in the same industry adopt fundamentally different strategies. One manufactures high-quality consumer electronics. Its products employ state-of-the-art technology, and the company offers a high level of customer send both before and after the sale. The other company emphasizes low cost with good performance. Its products utilize well-established technology but are never innovative. Customers buy these products at large, self-service warehouses and are expected to install the products using information contained in printed brochures. Which of the ratios discussed in this chapter would you expect to differ for these companies as a result of their different business strategies?
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