Day 4-Part 1 Slides-Ch 5-Part 1-6.30.11

Day 4-Part 1 Slides-Ch 5-Part 1-6.30.11 -...

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Business Management 301 Day 4: Part 1 June 30, 2011
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Day 4: Part 1 Agenda 1) Book Assignments 2) POW Review/Office Hours  Today (11:00- 12:00 in W308) 3) POW Quizzes—Both due Friday 9:00pm 4) Personal Information Cards 6) Behavior Based Interview Example 7) Chapter 5: TVM Part 1 8) Break
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ROE: The DuPont Formula ROE  = NI/Equity ROE=NI/Equity x  sales/sales  x  assets/assets Grouping Terms Together Yields: ROE =NI/ sales  x  sales / assets  x  assets /equity
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So, ROE is a Function of THREE Things: 1) NI/Sales = Net Margin                                             (i.e. Operating Efficiency/Profitability) 2) Sales/Assets = Asset Turnover                               (i.e. Asset Efficiency) 3) Assets /Equity = Equity Multiplier                        (i.e. Financing  or  Leverage  or  Solvency) ROE: The DuPont Formula
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  g* = ROE (1 - b)           where    Sustainable Growth Rate 
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  g* = ROE (1 - b)           where     b  = Dividend Payout Ratio   (Dividends / Net Income)     Sustainable Growth Rate 
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Day 4-Part 1 Slides-Ch 5-Part 1-6.30.11 -...

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