Breaking Down ROE Using the DuPont Formula By Z. Joe Lan‚ CFA Article Highlights • ROE calculates the return a company earns from shareholder’s equity. • The DuPont formula reveals the source of those returns: sales‚ marketing or debt. • Comparing a company’s financial performance to its peers can provide a useful context for analyzing ROE. R etur n on equity (ROE) is a commonly used profitability ratio that measures the effectiveness of management in generating earnings for shareholders
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. 1.1 Balance sheet Bank of America’s balance sheet has total assets of $2‚129‚046 million in 2011‚ which is less than last year’s $2‚264‚909 million‚ a fairly significant decline. There are a few primary assets on the balance sheet. The largest asset is loans and leases which makes up 41.92% of the total assets. The next largest asset was Available-For-Sale securities making up 12.97% of total assets. Total liabilities on the balance sheet were $1‚898‚945 million‚ with the primary
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CHAPTER 10 Acquisition and Disposition of Property‚ Plant‚ and Equipment ANSWERS TO QUESTIONS 1. The major characteristics of plant assets are (1) that they are acquired for use in operations and not for resale‚ (2) that they are long-term in nature and usually subject to depreciation‚ and (3) that they have physical substance. 2. The company should report the asset at its historical cost of $420‚000‚ not its current value. The main reasons for this position are (1) at the date of acquisition‚ cost
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Inc 2005 Current Ratio= 10‚454 (Current Assets) = 1.11% 9‚406 (Current Liabilities) 2004 Current Ratio= 8‚639 (Current Assets) 1.28% 6752 (Current Liabilities) Vertical Analysis- 2005 1‚716 (Cash‚ and Cash Equivalent) 0.054 or 5.4% 3‚1727 (Total Assets) Vertical Analysis- 2004
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raise funds for the selected investments? 3. How should short-term assets be managed and financed? 1-6 Balance Sheet Model of the Firm Total Value of Assets: Current Assets Total Firm Value to Investors: Current Liabilities Long-Term Debt Fixed Assets 1 Tangible 2 Intangible Shareholders’ Equity 1-7 The Capital Budgeting Decision Current Liabilities Current Assets Long-Term Debt Fixed Assets 1 Tangible 2 Intangible What long-term investments should
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Profitability Profit margin = net profit / sales Return on assets = operating profit/total assets Return on equity = net profit / total equity Coverage Debt to total assets = total debt / total assets Times interest earned (interest coverage ratio)= income before interest and taxes / interest expenses Case 2 Liquidity Current ratio = current assets/current liabilities Acid-test ratio = (current assets – inventory)/curr. liab. Efficiency Receivables turnover
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AIR ASIA BERHAD 1. INTRODUCTION Corporate governance is commonly known as the policies‚ practices or procedures a company implements to protect the financial interest of individuals. Publicly held companies are primary users of corporate governance because they sell stock to shareholders‚ who own the company. Several layers of management exist in these organizations‚ requiring shareholders to demand a high amount of accountability. A well balanced framework of accountability that is based
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| COGS | 3670 | 4109 | Interest | 291 | 280 | Depreciation | 125 | 122 | Cash | 250 | 313 | Accounts receivables | 1092 | 1162 | Current liabilities | 717 | 1051 | Inventory | 1495 | 1521 | Long-term debt | 2400 | 1100 | Net fixed assets | 4006 | 4123 | Common Stock | 1900 | 2100 | Taxes | 590 | 670 | PROVIDE SOLUTION HERE: CF to creditors = Interest paid – net new long-term-borrowing Net New Long-term Borrowing: 1‚100 – 2‚400 = -1‚300 Interest Paid: (291-280)
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Recap 02 — The Importance of Capital and the Basel Accord Transformation and Risk According to Paul McCulley: [T]he essence of banking is maturity‚ liquidity and quality transformation: holding assets that are longer‚ less liquid and of lower quality than the funding liabilities. Transformation is where banks make their money‚ and transformation entails risk. Thus the tension that underlies international banking: The banks are trying to ramp up risk in order to make more money‚ while the regulators
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Answer Key: D Question 4 of 15 | 1.0 Points | Which of the following are not generally rate-sensitive assets? | | | | A. securities with a maturity of less than one year | | | | | B. variable-rate mortgages | | | | | C. fixed-rate mortgages | | | | | D. all of the above are rate-sensitive assets | | | | | E. none of the above are rate-sensitive assets | | Answer Key: C Question 5 of 15 | 1.0 Points | Liabilities that are partially‚ but not fully
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