Ch 6 HW

Ch 6 HW - 5 0.16 0.102 0.153 10.139 Some trends in this...

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Chapter 6: #10 Return on Equity Capital (ROE)= Net Income/ Total equity capital Profit Margin (Net operating Margin)= (Total Operating Revenues- Total Operating Expenses)/ Total Assets Asset Utilization (AU)= Total operating Revenues/ Total Assets Equity Multiplier (EM)= Total Assets/ Total Equity capital Year Net Income  Total Operating Total  Total  Liabilities Total Equity   After- Tax Revenues Assets    Capital             1 $2.70 $26.50 $300.00 $273.00 $27.00 2 3.5 30.1 315 288 $27.00 3 4.1 39.8 331 301 $30.00 4 4.8 47.5 347 314 $33.00 5 5.7 55.9 365 329 $36.00 Year ROE Profit Margin AU EM           1 0.1 0.102 0.088 11.111 2 0.13 0.116 0.096 11.667 3 0.14 0.103 0.120 11.033 4 0.15 0.101 0.137 10.515
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Unformatted text preview: 5 0.16 0.102 0.153 10.139 Some trends in this table include the steady increase in Return on equity capital and asset utilization. It is shown that Equity Multiplier is steady decreasing. This becomes an adverse trend because the Equity Multiplier shows how the company is successfully leveraging or financing policies (how many dollars of assets must be supported by each dollar of equity). Recommendations to management in dealing with the banks decreasing EM is to look at their assets and see how well they are leveraged towards their total equity capital....
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