Evaluating The Management Effectiveness Ratios

1301 WordsSep 28, 20166 Pages
Concerning the management effectiveness ratios, PNRA is more effective in generating revenues and profit thanks to its equities than the industry in general. Indeed, the return on equity of the company is higher than the industry average, even though it experienced a small decrease between the year 2003, and 2006. During the year 2006, for every $100 of common equity, Panera bread has been able to generate $14.80 of income compared to $13.81 on average generated by the industry. However, in the same industry, Jack in The Box, and McDonald are a lot more efficient in generating income thanks to their common equity, with a return on equity ratio of 30.47%, and 22.93% respectively. This difference is mainly explained by the fact that McDonald and Jack In the Box have a higher debt to equity ratio. As they decided to finance their asset with a greater portion of debt than Panera Bread, they need less equity. This can also be explained by the fact that the net income of those two companies has grown in 2006 at a higher pace than the shareholders’ equity. Panera Bread is also more efficient in generating income thanks to the money it has to invest, with a return on asset ratio of 10.85% compared to the Industry average (6.77%). Regarding the profit margin, the ratio has decreased by a little bit more than 15% between the FY 2003, and the FY 2006. The decline of the return on sales can be explained by the fact that the company has chosen not to increase the price of its products
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