Return on Equity

1. Return on Equity https://store.theartofservice.com/the-return-on-equity-toolkit.html

2. Comcast Financial performance • The book value of the company nearly doubled from $8.19 a share in 1999 to $15 a share in 2009. Revenues grew sixfold from 1999's $6 billion to almost $36 billion in 2009. Net profit margin rose from 4.2% in 1999 to 8.4% in 2009, with operating margins improving 31 percent and return on equity doubling to 6.7 percent in the same time span. Between 1999 and 2009, return on capital nearly tripled to 7 percent. https://store.theartofservice.com/the-return-on-equity-toolkit.html

3. Just in time (business) Effects • Also, the factory began building many vehicles to order, eliminating the risk they would not be sold. This improved the company's return on equity. https://store.theartofservice.com/the-return-on-equity-toolkit.html

4. ExxonMobil - Ratios overview • Exxon had better return on assets (6.75 percent) and return on equity (14.57 percent) ratios (Mobil’s were 3.95 percent and 9.01 percent correspondingly) https://store.theartofservice.com/the-return-on-equity-toolkit.html

5. Rate of return • ROI is an abbrevation of return on investment, i.e. return per dollar invested. It is a measure of investment performance, as opposed to size (c.f. return on equity, return on assets, return on capital employed). https://store.theartofservice.com/the-return-on-equity-toolkit.html

6. Rate of return - Uses • Ratios typically used by financial analysts to compare a company’s performance over time or compare performance between companies include return on investment (ROI), return on equity, and return on assets. https://store.theartofservice.com/the-return-on-equity-toolkit.html

7. Capital gains tax - Norway • According to the papers explaining the new policy, a dividend tax without such shielding could push up the pressures on the rate of return on equity investments and lead Norwegian investors from equities to bonds, property etc. https://store.theartofservice.com/the-return-on-equity-toolkit.html

8. Decoupling - Utility regulation • As a result, many consumer advocates have requested and state and federal regulators have required that utility companies profit levels (measured through a return on equity allowance) be reduced to reflect lower risk. https://store.theartofservice.com/the-return-on-equity-toolkit.html

9. Just-in-time (business) - Effects • Also, the factory began building many vehicles build to order|to order, eliminating the risk they would not be sold. This improved the company's return on equity. https://store.theartofservice.com/the-return-on-equity-toolkit.html

10. Enterprise relationship management - Overview • * The 25 companies most active in alliances achieved a 17.2 percent return on equity - 40 percent more than the average return on equity of the Fortune 500. - Harbison et al. (2000) https://store.theartofservice.com/the-return-on-equity-toolkit.html

11. Enterprise relationship management - Overview • * The 25 companies least active in alliances lagged the Fortune 500, with an average return on equity of only 10.1 percent. - Harbison et al. (2000) https://store.theartofservice.com/the-return-on-equity-toolkit.html

12. Corporate finance - Working capital • * In this context, the most useful measure of profitability is Return on capital (ROC). The result is shown as a percentage, determined by dividing relevant income for the 12 months by capital employed; Return on equity (ROE) shows this result for the firm's shareholders. As above, firm value is enhanced when, and if, the return on capital exceeds the cost of capital. https://store.theartofservice.com/the-return-on-equity-toolkit.html

13. BC Hydro • Electricity is delivered through a network of 18,286 kilometers of transmission lines and 55,254 kilometers of distribution lines. For the 2008-2009 fiscal year, the domestic electric sales volume was 50,799 gigawatt hours and net income was $366 million, resulting in a return on equity of 11.75 per cent. As of March 31, 2009, BC Hydro and its subsidiaries employed 5844 full-time and part-time employees. https://store.theartofservice.com/the-return-on-equity-toolkit.html

14. ABN AMRO - Reaching a cross roads • ABN AMRO had come to a crossroads in early 2005. The bank had still not come close to its own target of having a return on equity that would put it among the top-five of its peer group, a target that the CEO, Rijkman Groenink had set upon his appointment in 2000. From 2000 until 2005, ABN AMRO's stock price stagnated. https://store.theartofservice.com/the-return-on-equity-toolkit.html

15. Deutsche Bank - Post-WWII • These formed part of an overall growth strategy that also targeted a sustainable 25% return on equity, something the bank achieved in 2005. https://store.theartofservice.com/the-return-on-equity-toolkit.html

16. Leverage (finance) - Worked example • Equals return on equity = 8% + 5% = '13%' https://store.theartofservice.com/the-return-on-equity-toolkit.html

17. Concur - Current status • * The company was named to the Seattle Times NW 100 ranked at #12 and was previously ranked at #4. To rise to the top of The Seattle Times' rankings, companies must excel over a two-year span on four performance measurements: return on equity, stock-price appreciation, sales per employee and operating income. https://store.theartofservice.com/the-return-on-equity-toolkit.html

18. Working capital - Decision criteria • The result is shown as a percentage, determined by dividing relevant income for the 12 months by capital employed; return on equity (ROE) shows this result for the firm's shareholders https://store.theartofservice.com/the-return-on-equity-toolkit.html

19. Modigliani-Miller theorem - Proposition II • * r_E is the required rate of return on equity, or cost of equity. https://store.theartofservice.com/the-return-on-equity-toolkit.html

20. Modigliani-Miller theorem - Proposition II • A higher debt-to-equity ratio leads to a higher required return on equity, because of the higher risk involved for equity-holders in a company with debt. The formula is derived from the theory of weighted average cost of capital (WACC). https://store.theartofservice.com/the-return-on-equity-toolkit.html

21. Stock - Share price determination • First, because financial risk (financial)|risk is presumed to require at least a small premium on expected value, the return on equity can be expected to be slightly greater than that available from non-equity investments: if not, the same rational calculations would lead equity investors to shift to these safer non-equity investments that could be expected to give the same or better return at lower risk https://store.theartofservice.com/the-return-on-equity-toolkit.html

22. Lehman Brothers - An evolving partnership (1969–1984) • Under Peterson's leadership as Chairman and CEO, the firm acquired Abraham Co. in 1975, and two years later merged with the venerable, but struggling, Kuhn, Loeb Co., to form Lehman Brothers, Kuhn, Loeb Inc., the country's fourth-largest investment bank, behind Salomon Brothers, Goldman Sachs and First Boston. Peterson led the firm from significant operating losses to five consecutive years of record profits with a return on equity among the highest in the investment-banking industry. https://store.theartofservice.com/the-return-on-equity-toolkit.html

23. Financial statement analysis • 3.2) Analysis of profitability refers to the analysis of return on capital, for example return on equity, ROE, defined as earnings divided by average equity. Return on equity, ROE, could be decomposed: ROE = RNOA + (RNOA - NFIR) * NFD/E, where RNOA is return on net operating assets, NFIR is the net financial interest rate, NFD is net financial debt and E is equity. In this way, the sources of ROE could be clarified. https://store.theartofservice.com/the-return-on-equity-toolkit.html

24. Financial statement analysis • Unlike other ratios, return on capital has a theoretical benchmark, the cost of capital - also called the required return on capital. For example, the return on equity, ROE, could be compared with the required return on equity, kE, as estimated, for example, by the capital asset pricing model. If ROE WACC, where WACC is the weighted average cost of capital), then the firm is economically profitable at any given time over the period of ratio analysis. The firm creates values for its owners. https://store.theartofservice.com/the-return-on-equity-toolkit.html

25. Stock dilution - Value dilution • Value dilution describes the reduction in the current price of a stock due to the increase in the number of shares. This generally occurs when shares are issued in exchange for the purchase of a business, and incremental income from the new business must be at least the return on equity (ROE) of the old business. When the purchase price includes goodwill, this becomes a higher hurdle to clear. https://store.theartofservice.com/the-return-on-equity-toolkit.html

26. Tax shield - Case B • The reason that he was able to earn additional income is because the cost of debt (i.e. 8%) is less than the return earned on the investment (i.e. 10%). The 2% difference makes income of $80 and another $100 is made by the return on equity capital. Total income becomes $180 which becomes taxable at 20%. https://store.theartofservice.com/the-return-on-equity-toolkit.html

27. Adjusted present value - APV formula • The discount rate used in the first part is the return on assets or return on equity if unlevered. https://store.theartofservice.com/the-return-on-equity-toolkit.html

28. Performance paradox - Multiple measures and growth of the performance measurement industry • And the 1960s and 1970s saw the emergence of purely financial measures of performance relating information on dividends and return on equity https://store.theartofservice.com/the-return-on-equity-toolkit.html

29. Performance paradox - Change in dominant measures • A compilation of surveys examining the stated financial goals of companies over the century found the following: companies strove to maximize market share in the late 1960s; earnings per share in the mid-1970s; return on equity in the early 1980s; and cash flow and share prices in present day https://store.theartofservice.com/the-return-on-equity-toolkit.html

30. Growth stock - Criteria • Analysts compute Return on equity (ROE) by dividing a company's net income into average Ownership equity|common equity. To be classified as a growth stock, analysts generally expect companies to achieve a 15 percent or higher return on equity. CAN SLIM is a method which identifies growth stocks and was created by William O'Neil a stock broker and publisher of Investors Business Daily. https://store.theartofservice.com/the-return-on-equity-toolkit.html

31. DuPont analysis • 'DuPont analysis' (also known as the 'dupont identity', 'DuPont equation', 'DuPont Model' or the 'DuPont method') is an expression which breaks ROE (Return On Equity) into three parts. https://store.theartofservice.com/the-return-on-equity-toolkit.html

32. DuPont analysis - ROE analysis • The Du Pont identity breaks down Return on Equity (that is, the returns that investors receive from the firm) into three distinct elements. This analysis enables the analyst to understand the source of superior (or inferior) return by comparison with companies in similar industries (or between industries). https://store.theartofservice.com/the-return-on-equity-toolkit.html

33. T-model • ROE = the company's return on equity, i.e. earnings during the period / book value; https://store.theartofservice.com/the-return-on-equity-toolkit.html

34. T-model - The cash-flow T-model • In 2003 Estep published a version of the T-model that does not rely on estimates of return on equity, but rather is driven by cash items: cash flow from the income statement, and asset and liability accounts from the balance sheet. The cash-flow T-model is: https://store.theartofservice.com/the-return-on-equity-toolkit.html

35. Return on equity • 'Return on equity' ('ROE') measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' equity (also known as net assets or assets minus liabilities). ROE shows how well a company uses investment funds to generate earnings growth. ROEs between 15% and 20% are generally considered good. https://store.theartofservice.com/the-return-on-equity-toolkit.html

36. Return on equity - The formula • :\mathrm = \frac \mbox Net Income \mbox Shareholder Equity http://www.answers.com/topic/return-on-equity Answers.com Return on Equity https://store.theartofservice.com/the-return-on-equity-toolkit.html

37. Return on equity - The DuPont formula • Thus, a higher proportion of debt in the firm's capital structure leads to higher ROE.[http://www.investopedia.com/university/ratios/profitability-indicator/ratio4.asp Profitability Indicator Ratios: Return On Equity], Richard Loth Investopedia Financial leverage benefits diminish as the risk of defaulting on interest payments increases https://store.theartofservice.com/the-return-on-equity-toolkit.html

38. Decoupling (utility regulation) • As a result, many consumer advocates have requested and state and federal regulators have required that utility companies profit levels (measured through a return on equity allowance) be reduced to reflect lower risk. https://store.theartofservice.com/the-return-on-equity-toolkit.html

39. Return (finance) • 'ROI' is an abbreviation of return on investment, i.e. return per dollar invested. It is a measure of investment performance, as opposed to size (c.f. return on equity, return on assets, return on capital employed). https://store.theartofservice.com/the-return-on-equity-toolkit.html

40. National Stock Exchange of Australia - Management Efficency • As of 2013 the National Stock Exchange of Australia had return on total asset (ROA) of -38.76%, this means that it has lost $38.76 on every $100 spent on assets. Similarly, the National Stock Exchange of Australia shows return on equity (ROE) of -99.65% meaning that it generated substantial loss on money invested by shareholders. https://store.theartofservice.com/the-return-on-equity-toolkit.html

41. Finance lease - Impact on accounting • * Under operating lease conditions, lease obligations are not recognized; therefore, leverage ratios are understated and ratios of return (return on equity|ROE and return on assets|ROA) are overstated. https://store.theartofservice.com/the-return-on-equity-toolkit.html

42. Earnings growth - Overview • Note that for SP500, the return on equity has ranged between 10 to 15% during the 20th century, the plowback ratio has ranged from 10 to 67% (see payout ratio). https://store.theartofservice.com/the-return-on-equity-toolkit.html

43. Strategic planning software • In the 1970s, the Strategic Planning Institute collected data on the performance of business units at its subscribers.http://www.inc.com/encyclopedia/profit-impact-of-market-strategies-pims.html The resulting Profit Impact of Market Strategyhttp://pimsonline.com/ (PIMS) model was very influential with its key insights about the value of having highest or second highest market share in improving profitability and return on equity https://store.theartofservice.com/the-return-on-equity-toolkit.html

44. CROCI • The ratio is similar to Return on equity|ROE ratio, but CROCI is calculated on a cash basis and on an Enterprise value|EV-basis, taking into account all the company's security-holders. https://store.theartofservice.com/the-return-on-equity-toolkit.html

45. GT Interactive Software - 1997 – $530 million in revenues but $25 million net loss • For 1997 GTIS's return on equity was a dismal -16.14%.[http://www.johnson.cornell.edu/parkercenter/docs/studentresearch/1998_spring/erts.pdf ElecArts.PDF] For the year, GTIS's revenue growth continued to decelerate, increased only 45% to $530 million.[http://www.atnewyork.com/news/article.php/249211 Gt Interactive Hires Disney Honcho, Raises Cash] During 1997 GT Interactive posted its first net loss, totalling $25 million. https://store.theartofservice.com/the-return-on-equity-toolkit.html

46. KeyBank • By 1993, the rural strategy with local management and minimal technology made Key a very profitable bank. However, it was getting tougher for Riley and CFO William Dougherty to maintain their 15 percent return on equity target and investors were cooling on Key stock after many high growth years. Accordingly, Key began testing a Vision 2001 computer system, which would speed up and enhance the loan process through faster credit scoring, loan servicing and collection capabilities. https://store.theartofservice.com/the-return-on-equity-toolkit.html

47. ROCE • * Return on equity|Return on Common Equity, used in finance as a measure for return on invested capital (not the same as Ret. on Cap. Empl.) https://store.theartofservice.com/the-return-on-equity-toolkit.html

48. Handelsbanken - 1970-1990 • In 1973, a particular form of profit sharing scheme was introduced. When Handelsbanken meets its goals of higher return on equity than the average of the other listed Swedish banks, a profit share is paid to a foundation named Oktogonen, which keeps its fund entirely in Handelsbanken shares. Payment only takes place after retirement, which means that all employees are interested in securing the long-term profitability of the bank. Oktogonen owns around 10 per cent of Handelsbanken's shares. https://store.theartofservice.com/the-return-on-equity-toolkit.html

49. Sustainable growth rate - Relationship between revenue growth, total shareholder value creation and profitability • Return on Assets (ROA), Return on Sales (ROS) and Return on Equity (ROE) do rise with increasing revenue growth up to 10 to 25% and then fall with further increasing revenue growth rates. https://store.theartofservice.com/the-return-on-equity-toolkit.html

50. Business-agile enterprise - Overview • Business-agile enterprise improves financial measurements such as margins, profitability, time to market, revenue growth, earnings per share, ebitda (earnings before interest, taxes, depreciation amortization, return on equity), return on assets, and return on investments. https://store.theartofservice.com/the-return-on-equity-toolkit.html