First of all, return on asset (ROA) is a ratio used to measure how efficient a company generates profit using its assets, which is the invested capital. We noticed that HH’s ROA was increasing from 2006 to 2010. However, HH’s ROA for 2011 dropped dramatically from 18.41%(year
[pic] The Boeing’s structure consists of two main divisions and two Reasons: - In comparison to 2008, sales in 2010 increased by $3381 million. - In comparison to 2008, CGS in 2010 increased only by $1513 million. Boeing’s 2010 Gross Profit Margin ratio is comparable with the industry norm of 19,7%. ROA ratio indicates the efficiency with which management has used its available resources to generate income. In 2009 there was a decrease in ROA value, but ROA in 2010 matches the industry average. That means that assets in 2010 were used efficiently.
ROA | 2008 | 2009 | 2010 | Home Depot | 9.50 | 5.62 | 6.41 | Lowe’s | 9.10 | 6.73 | 5.40 | ROA is considered the best overall indicator of the efficiency of assets used in a company. Home Depot and Lowe’s ROA ratio both moved down due to the downturn in the industry but Home Depot was able to improve 2010.
* Return on assets (ROA) – ROA shows how successful a company is in generating profits on the amount of assets they own. Since assets consist of debt and equity, ROA is a measure of how well a company converts investment dollars into profit. The higher the percentage, the more profit a company is generating per dollar of investment. Similar to ROS, this ratio needs to be looked at compared to the industry as different industries have different requirements that can affect ROA. For example, companies in the airline and mining industries need expensive assets to operate so will have lower ROA’s compared to companies in the pharmaceutical or advertising industries.
I. Rate of Return on Total Assets: Measures the company’s profitability relative to total assets. A percentage increment for Company G, from 12.30% to 13.68% (2011-12) keeps them above industry benchmarks (8.60% and 12.30%). Rate of Return on Total Assets represents strength for Company G.
I have reviewed the notes from the above meeting from Todd Schuver and have spoken to a few of the other partners. I remain quite concerned about the financial stability of the project and its future ability to produce a return on invested capital.
• Any type of project with greater total cash inﬂows than total cash outﬂows, should always be accepted.
Rate of return on common stockholders’ equity: This ratio determines how much profit the company makes from the money invested by the shareholders. Investors will use this ratio to determine if the company is profitable over
Rate of return on common shareholders’ equity The rate of return on common shareholders’ equity ratio is an indication of a company’s ability to generate income for each dollar invested by its
JWI 530: Financial Management I Academic Submissions and Evaluations Assignment 2: Management Accounting Application Due Week 10, Day 7 (Weight: 22.5%) In this assignment you will demonstrate your understanding of capital investment techniques by evaluating the following three case studies.
Recommendation In my opinion the company should reject the project as the ARR is much less than expected and the payback period is nearly as long as the maximum payback period which could put company to danger.
Investment in machine $540,000 10 years cash inflow $286,000 PV of cash inflow $39,182 Payback period = 4.5 years NPV= 286000 IRR= 2.8% Reasons for selection: * Positive cash flow * IRR> COC * Payback period is less than the standard Q 2: Should Ken Richards send that proposal to home office for approval? Ken need send this proposal to home office What can you recommend to overcome such dysfunctionaleffects? Yes, in the investment center. The managers are responsibility for the segments,investmentand asset base as well as the profits. Usually, evaluate based on the return on assetsemployed, evaluation might include a variety of measures such as profit, return oninvestment, residual income, economical valued added and a range of non-financialmeasures. Hence the manager in the districts should consider about the acquisition of newequipment which is an investment for the segment. And also, they evaluated equipments andaccounts receivable etc. based on the return on assets employed. May be it can also be the profit center because the managers usually evaluated in terms of effectiveness in raisingsegment profit level and controlling costs.QMSC should use EVA instead of ROA as the measure of district and manager performance. Since EVA is the best proxy for shareholder value at the business unit level, improving EVA will also improve the companys overall performance. The managers district objectives will then be congruent with the companys overall objectives. This will induce Mr. Richards to employ additional assets
Data Envelopment Analysis (DEA) is a non-parametric direct programming based method for assessing the relative proficiency of Decision making units (DMUs) which was presented by Charnes, Cooper, and Rhodes , there has been a substantial number of research on DEA models that a bunches of specialists have grown, for example, BCC show (Banker,Charnes,&Cooper,,FDH model, SBM model,EBM display , RBM demonstrate  and NEBM.As showed in , Wellsprings of wastefulness and efficiencies, positioning of DMUs, assessment of the adequacy of program or strategies, administrations assessment, making a quantitative reason for reallocating assets, and so on, these can be recognized by the utilization of DEA. DEA has increased significant consideration as administrative instrument for measuring the execution of DMUs and port execution in the course of the most recent decades.
The next step of the project involved identifying and bifurcating the detail 's and basis of the project cost, compare the cost with similar projects and dеtеrminе thе phasing of еxpеnditurеs. Finally, thе financial analysis of thе company was done to dеtеrminе its viability and profitability. This analysis is basically required in thе dust free paper with sharp printing to analyst thе financial aspects of any capital investment projеct along with its technical feasibility and ratio analysis and also to the journal entries of receipts of the bills made.