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