B Chapter 13

B Chapter 13 - B Chapter 13 Financial Statement Analysis...

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B Chapter 13 Financial Statement Analysis PP. 382-383 Table of Ratios Problem with Ratios is that different industries place differing emphasis on the ratios: I.e. Utilities have a high ROS, but ROE is low; Supermarkets have a low ROS, but higher ROE Return on Invested Capital is used by some firms to measure divisional performance where the division has significant influence on decisions on asset requisitions, purchasing and production schedules, credit policy, and cash management, and level of divisions’ CL
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If you used all equity financing, the required rate would steadily increase, and you lose the possibility of leveraging your investment: I.e. With debt, you borrow money at a fixed interest cost and the excess of the invested return over the cost of debt goes to shareholders Interest is added back on Invested Capital ratios to eliminate the influence of how invested capital is raised ROI can be stated as : Net Income/Sales * Sales/Investment OR Profit Margin or Return on Sales * Investment Turnover (Asset Turnover,
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This note was uploaded on 12/07/2010 for the course ACCT 2030 taught by Professor Harris during the Spring '10 term at U. Memphis.

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B Chapter 13 - B Chapter 13 Financial Statement Analysis...

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