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First Investment Inc.: Analysis Of Financial Statements
Essay specific features
Written by:
Daniela B
Date added:
January 8, 2016
Level:
University
Grade:
A
No of pages / words:
3 / 708
Was viewed:
9618 times
Rating of current essay:
Essay content:
So, if a substitution is made for the interest expense, we get:
ROE = [(EBIT / sales) * (sales / assets) – (interest expense / assets)] * (assets / equity) * (1 – tax rate)
The practicality of this breakdown is not as clear as the three-step, but this identity provides us with:
ROE = [(operating profit margin) * (asset turnover) – (interest expense rate)] * (equity multiplier) * (tax retention rate)
Now these different ratios are explained as under...
displayed 300 characters
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So, if a substitution is made for the interest expense, we get:
ROE = [(EBIT / sales) * (sales / assets) – (interest expense / assets)] * (assets / equity) * (1 – tax rate)
The practicality of this breakdown is not as clear as the three-step, but this identity provides us with:
ROE = [(operating profit margin) * (asset turnover) – (interest expense rate)] * (equity multiplier) * (tax retention rate)
Now these different ratios are explained as under...
displayed 300 characters
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