Different Factors Affect Profitability Indicators Among

802 WordsApr 30, 20174 Pages
Different factors affect profitability indicators among different industries by Thuy Nguyen Advisor: Professor Sami Keskek An Honors Thesis in partial fulfillment of the requirements for the degree Bachelor of Science in Business Administration in Accounting. Sam M. Walton College of Business University of Arkansas Fayetteville, Arkansas May 12, 2017 Introduction (1 page) Review of Literature (1 page) Study Methodology (1 page) Industries Sectors Healthcare Consumer Discretionary Consumer Staples Materials Industrial Energy IT Financials Real Estate V. Conclusion VI. Bibliography Introduction I also want to become an investor. So I want to know how investors use…show more content…
Many professional investors look for a ROE of at least 15%. It means they want at least 15% profit on every dollar invested by shareholders ROA = annual net income/total assets How much profit a company earns for every dollar of its assets. Assets include things like cash in the bank, accounts receivable, property, equipment, inventory and furniture. Few professional money managers will consider stocks with an ROA of less than 5%. A bank’s ROA is typically well under 2%, low ROAs Technology companies have very few assets so they will often have high ROAs. ROE is different from ROA because of financial leverage = debt. Debt ampllifies in relation to ROA ROE does not say much about how well a company uses its financing from borrowing and bonds. ROE can be impressive but not effective at using the shareholders’ equity to grow the company. ROA help you see how well a company puts both these forms of financing to use. Review of Literature Some literature about Financial Ratios, how they are important to investors. How investors use Profit indicators and predict future III. Study Methodology In this thesis, I will use Regression to analyze the relation between specific profit indicators (ROA, ROI..) and other factors (COGS, depreciation, amortization..) Besides those financial ratios calculated in
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