Topic 2b Disaggregation of ROA and ROE.pptx

Topic 2b Disaggregation of ROA and ROE.pptx - Analysing...

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Analysing Performance with Ratios Topic 2b - Decomposing ROA & ROE
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Value Drivers and FSA Cost of Capital = r Asset Structure Capital Structure r ROExSHF r E P Assets EBIT ROA Assets Debt Leverage Taxes 1 1 Sales Sales Growth Sales t t Sales t GrossProfi Margin Profit Gross Sales Expenses centage ExpensePer Sales EBIT OPM Assets Sales ATO Debtors Sales DaysRec Inv COGS InvTO s FixedAsset Sales FATO
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Core Value Driver Capital Structure r ROExSHF r E P Assets EBIT ROA Assets Debt Leverage Sales EBIT OPM Assets Sales ATO
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ROA Decomposed ROA = OPM x ATO ROA = Return on Assets OPM = Operating Profit Margin ATO = Asset Turnover EBIT Assets EBIT Sales Sales Assets = x
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ROA = OPM x ATO Tradeof OPM ATO Why this shape across industries? Coles, Woolworths Aldi Jewelery Prestige cars Coco Cola Amatal
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ROA Disaggregation ROA for whole firm Disaggregate ROA into PM & AT for whole firm
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