Financial analysis - Ratio analysis

6 important questions on Financial analysis - Ratio analysis

In ratio analysis the analyst can compare ratios for:

A firm over several years (time series comparison)
the firm and other firms in the industry (cros sectional comparison)
to some absolute benchmark

When computing ROE the .... Equity is most appropriate

Average

When traditionally decomposing ROE, which formulas arise?

ROE= ROA x Equity multiplier
ROA= profit or loss/ total assets x revenue/ total assets
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When decomposing ROE in the alternative matter, the following formulas arise:

ROE= NOPAT + NIPAT/ equity - interest expense after tax / equity
ROE= return on invested capital + spread x financial leverage

Return on invested capital is  a measure of how

Profitably a company is able to deply its operating and non operating assets to generate profits

Gross margin is influenced by two factors

The price premium a firms product or service command in the market place
the efficiency of the firms procurement and production process

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