RETURN Formula Return on equity (ROE) is net profit
ON Description: divided by total equity. EQUITY (ROE) What Does Return on equity tells you how Return On effectively a company is using Equity Tell the dollars invested in it by You? stockholders.
ROE is the most often quoted single
statistic when describing a firm's performance. It is also one of the statistics considered to be most useful by stockholders. RETURN Formula You determine return on assets by ON Description: dividing net profit by your total asset ASSETS base. (ROA)
What Does Return on assets is an efficiency
Return On ratio. It compares the profits Assets Tell generated with the asset base You? required. It answers the question, how hard are you working your assets?
There is an economic opportunity
cost notion associated with this ratio. An operating manager may be challenged with how a dollar spent on assets might do compared with a dollar invested in some other area (e.g., a bank account), or how the ROA compares with the interest a firm is paying on the money borrowed to pay for the asset. RETURN Formula You determine return on sales by ON Description: dividing net profit by net sales. SALES What Does Return Since return on sales (ROS) gives (ROS) On Sales Tell the analyst an idea of the profit You? margin on a product, this ratio can reveal a great deal about product positioning and pricing policies. For example, a high ROS suggests premium pricing. This suggests the product will not be aimed at a commodity market. ROS is also a good indicator of demand and supply within the industry. The more competitive an industry, the more pressure there is on price and subsequently ROS falls. For example, the ROS of the airline industry has been low due to intense competition in the last few years. Asset Formula Asset turnover is derived by dividing Turnover Description: period sales by average total assets. (T/O) What Does Asset Asset turnover tells an analyst more Turnover Tell about volume of sales than it does You? about profitability (the numerator is a top line number on the income statement, not a bottom line number).
Asset turnover (T/O) demonstrates
how effective the asset base is in generating top line revenue. High T/O values have implications in terms of plant structure, level of backward integration, and aggressiveness of pricing policy. CUM- Formula Cumulative Profits is the total ULATIVE Description of all year's Net Profit. PROFITS :
What Does How Profitable the company
Cumulative has been over time Profits Tell You? MARKET Formula Percentage share of industry sales SHARE Description: dollars. BY DOLLAR VOLUME What Does What portion of total industry sales Market Share a company has captured. in Dollars Tell You? STOCK Formula Stock Price is a function of PRICE Description book value, EPS, and : average dividend.
What Does This is an indication of the
Stock Price value independent Tell You? investors believe you shares possess. MARKET Formula Market Capitalization is calculated by CAP Description: determining the weighted average number of shares for a given period and then multiplying that number by the closing Stock Price. What Does Market The recognition that Market Cap is a Cap Tell You? function of both share price and share volume is significant for this number tells you more about the real value of the company than just the share price alone. In the extreme a corporation could be trading at a huge P/E multiple but if it only had relatively few shares outstanding then the company would not be worth as much as a company that was trading at a relatively poor multiple but had a large number of shares outstanding. Market Cap is the truest indication of the markets estimate of a company's worth. Capsim Performance Measures • You must use at least 3 performance measures total, with at least 1 market-based measures (stock price / market cap) • No one measure can be weighted more than 50% of your total weightings. • Your initial performance measures and mission statements are due in lab prior to Week 1 of the simulation. • You have a last chance to change measures in lab after Week 2, after that the choices are frozen.