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A type of analysis that examines a company's
Return on Equity (ROE) by breaking it into three
main components: profit margin, asset turnover
and leverage factor.




  vikas vadakara
 Profit margin indicates how efficient the company’s
  management is in operating the company and in
  controlling costs.

 Asset turnover measures the efficiency of the
  company in generating sales for every dollar of asset.

 The equity multiplier shows how leveraged a
  company is by computing how much financing
  stockholders provided for every rupee of asset.




                        vikas vadakara
Earnings
            Operating
             Profit
             Margin              Return On
  Income            X   =        Assets (less
  Stream                          interest
             Asset                  adj.)
            Turnover                                Return On
                                           X    =
                                                     Equity
            Turnings




            Financial
Investmen
            Structure
     t
  Stream    Leverage

                        vikas vadakara
A manager has basically three ways of improving
operating performance in terms of ROA and ROE.
Such as.........

• Increase capital asset turnover
• Increase operating profit margins
• Change financial leverage




                       vikas vadakara

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Financial statement

  • 1. A type of analysis that examines a company's Return on Equity (ROE) by breaking it into three main components: profit margin, asset turnover and leverage factor. vikas vadakara
  • 2.  Profit margin indicates how efficient the company’s management is in operating the company and in controlling costs.  Asset turnover measures the efficiency of the company in generating sales for every dollar of asset.  The equity multiplier shows how leveraged a company is by computing how much financing stockholders provided for every rupee of asset. vikas vadakara
  • 3. Earnings Operating Profit Margin Return On Income X = Assets (less Stream interest Asset adj.) Turnover Return On X = Equity Turnings Financial Investmen Structure t Stream Leverage vikas vadakara
  • 4. A manager has basically three ways of improving operating performance in terms of ROA and ROE. Such as......... • Increase capital asset turnover • Increase operating profit margins • Change financial leverage vikas vadakara