Question

Asked Aug 21, 2019

1 views

There are vairous measures to evaluate a company's finances. What are three measures that look at shareholder equity as part of the formula?

Step 1

Your question isn't very clear and could be answered in atleast two different ways. I will provide two solutions and I'm sure you'll know which one answers your question aptly.

Solution with Du Pont Equation:

Du Pont equation represents Return on Equity as product of three measures namely profit margin, asset turnover, and financial leverage.

Return on Equity is a measure of profitability of business and it indicates how efficiently income is generated with investments received from shareholders. Profit margin is a measure of profits as percentage of revenues/sales. Asset turnover ratio represents assets ability to generate sales. Financial leverage shows how much debt is used to acquire more assets.

Du Pont equation can be written as shown in the last line below.

Step 2

Solution with financial ratios:

Another interpretation of your question could be that you were looking for financial ratios which are calculated using shareholder's equity.

Three such important ratios are ROE, Shareholder equity ratio and Debt to Equity ratio.

ROE is a measure of profitability and shows what returns ae generated ...

Tagged in

Find answers to questions asked by student like you

Show more Q&A

Q: Your firm is offered credit terms of 1/10, net 35. What is the effective annual interest rate on thi...

A: Calculating the value of effective interest rate on the credit terms. We have,Effective interest rat...

Q: Phillips Equipment has 80,000 bonds outstanding that are selling at par. Bonds with similar characte...

A: Calculation of weights of three components: Excel spread sheet:Note: Assumed $1,000 as par value

Q: Please calculate the Sharpe measure for the S&P 500 over the last ten years if the standard devi...

A: Sharpe Ratio or Sharpe measure of a security = Return in excess of risk free rate / Standard deviati...

Q: Decide whether the following statement makes sense (or is clearly true) or does not make sense (o...

A: The correct answer is “Statement B”.

Q: A 10-year bond has a coupon rate of 11%, a par value of $1000. If the bond’s YTM is 7%, what is the ...

A: Assume semi annual coupon bond (Such an assumption is customary to bonds in US market). This means c...

Q: Hello, I'm having a hard time with finance in general. I can do basic math with out difficulity but...

A: Finance or financial management involves handling of large quantum of money. Whenever money exchange...

Q: The simplified balance sheet for the Dutch manufacturer Rensselaer Felt (figures in € thousands) is ...

A: Recall the popular equation:Ra = Ws x Rs + Wd xRd + We x Rewhere Ra = return on assets;Ws, Wd and We...

Q: Please show how to get the missing values step by step

A: Part (1)Please see the white board.

Q: I got an answer of 6.2% for this question, Can you confirm or deny my answer? R.S. Green has 250,000...

A: The final answer is 6.16% that can be rounded off to 6.2%. Hence, your answer is correct.Let's assig...